clock menu more-arrow no yes

Filed under:

Houses Can't Keep Up With Stocks, So Let's Ditch 'Em

"As the value of real estate has skyrocketed, owners have become enamored of the wealth their homes are creating, with many concluding that real estate is now a safer and better investment than stocks." -Motoko Rich and David Leonhardt, New York Times, 08/19/05

Absurd! In fact, as Rich and Leonhardt point out, even in NY and SF, the average home has returned only about 7% a year since 1970, compared to 10% for the S&P 500. We have no idea where investors may have gotten the ridiculous idea to treat their homes as investments. Oh, hold on, here's something:

There are certainly serious reasons to believe that house prices will not suffer the fate of technology stocks. Not only are houses more tangible, but people do not sell their homes as quickly as stocks, making a panic much less likely. Because of tax advantages, few owners are likely to sell and rent something else simply because local house prices start to decline. As high as they might seem now on the coasts, home prices nationally have not quite doubled over the last decade; during the 1990's, the Standard & Poor's 500-stock index more than quadrupled. -Motoko Rich and David Leonhardt, New York Times, 3/25/05
· In the Long Run, Sleep at Home and Invest in the Stock Market [NY Times]
· Giggle, Giggle, Go Go Real Estate Bubble [Curbed]