[electricslpnsld]

> there really aren't that many good investment opportunities over the long term

What’s wrong with the market as a long (emphasis) term investment vehicle? ~7% average yearly returns for the past 150 years is pretty solid. Yea you have to insulate yourself from market fluctuations, but that’s also true of the housing market (see the collapse of the US housing market 10 years ago). Barring a complete collapse of the US economic system, in which case Americans will have other things to worry about, how is housing superior than some boring-old Vanguard market tracking ETFs/Mutual Funds? Better returns?

[cpitman]

Certainly isn't returns. Over the last 10 years, housing in the US has appreciated on average 39%, or 3.4% annually (https://fred.stlouisfed.org/series/CSUSHPINSA). Over the exact same time period, the S&P 500 with reinvested dividends has gone up ~323%. or 15.5% annually (https://dqydj.com/sp-500-return-calculator/).

To avoid cherry-picking, if we go out to 20 years housing has an average annual return of 4%, and the S&P 500 is at 6%. Go out 30 years and housing hits 5% while the S&P is at 10%.

PS, I really appreciate the Case-Schiller index used above for housing prices. It's methodology specifically targets the change in value of a house, instead of capturing overall price increases caused by house flipping, the expanding size of houses over time, etc.

[zzzzzzzza]

I think that looking at avg house appreciation is probably not a very good way to measure things, since there are large swaths of empty land and then a few hot spots. What's the average return of urban real estate? The average return of urban real estate by state? Now those numbers, would probably be interesting.

[cpitman]

There are separate Case-Shiller Indexes for 20 large metro areas, as well as composite indexes for the 10 or 20 largest metro areas.

For the 10 largest metro areas (https://fred.stlouisfed.org/series/SPCS10RSA), the annual returns are the following. Interesting to note that nationally home values are over their 2006 peak values, but that in the 10 largest metro areas home values are only about even with the previous peak.

  10 Years: 3.8%
  20 Years: 4.7%
  30 Years: 3.6%

Alternatively, if you look at just San Francisco (https://fred.stlouisfed.org/series/SFXRSA):

  10 Years: 7.8%
  20 Years: 5.7%
  30 Years: 4.8%

[paxys]

Are you factoring in saved rents and tax deductions in the housing number?

[barry-cotter]

Investment returns on German, Japanese, Russian, Polish, Zimbabwean, Austro-Hungarian stock exchanges since 1910 look pretty awful. More generally you’re assuming away political risk. Once your investments go to zero you’re done.

As an investment housing does much better when compared to equities than we thought until recently and it’s less risky. If the Communists come you’re screwed no matter what but if there’s regime change there’s a decent chance you can keep real property, especially if it’s local.

> The authors of the aforementioned study — Òscar Jordà, Moritz Schularick and Alan M. Taylor — have constructed a new database for the U.S. and 15 other advanced economies, ranging from 1870 through the present. Their striking finding is that housing returns are about equal to equity returns, and furthermore housing as an investment is significantly less risky than equities.

> In their full sample, equities average a 6.7 percent return per annum, and housing 6.9 percent. For the U.S. alone, equities return 8.5 percent and housing 6.1 percent, the latter figure being lower but still quite respectable. The standard deviation of housing returns, one measure of risk, is less than half of that for equities, whether for the cross-country data or for the U.S. alone. Another measure of risk, the covariance of housing returns with private consumption levels, also shows real estate to be a safer investment than equities, again on average.

https://www.bloomberg.com/opinion/articles/2019-03-21/buy-a-...