Apr 22, 2018

I am generally sympathetic to the idea that homes are a bad investment. The fundamentals are terrible, as discussed in the article, the most important one probably being the lack of diversification. But I wonder how it meshes with the results proposed by the article "The Rate of Return of Everything." That article found that housing has only slightly underperformed stocks as an investment.

Now, obviously, if you're living in your house, you're not going to get nearly the same return -- this is the total return on housing, so a house you're living at could be expected to provide returns on average as listed, minus the annual value of rent. But that means its overall performance as an investment is actually better than observed appreciation.

https://www.frbsf.org/economic-research/files/wp2017-25.pdf