Via the Wall Street Journal:
Critics may point out that the analysis is unfair — after all, it starts counting near the peak of the 1980s housing boom. Fair enough. Look at the performance since, say, early 1994, when home prices were near a historic trough. Surely someone who bought then has made a bundle.
Not necessarily. Since then the ten-city index has risen from a value of 76 to 151. Annual return: 4.7%. Inflation over that period: 2.5%. That’s still only a real return of 2.2% a year above inflation.
You can often do better on long-term inflation protected government bonds.
And real estate often costs 2% or more a year in property taxes, condo fees, maintenance, insurance and the like.
Conventional wisdom long held that home ownership was a route to wealth, and the imputed rent — in other words, the right to live in your home — was just part of the value you got from it. Under that widespread view, the recent housing bust was simply a temporary, though deep, pothole.
Yet for very many people, even over the past 15 or 20 years, the imputed rent may have been all, or nearly all, the real value they actually got from their home.