The Real Estate Bloggers

California Homes Are A Lousy Investment?

Posted: 12 Jul 2011 11:57 AM PDT

Upside-down-house Robert Bridges, a professor of clinical finance, has an article in the Wall Street Journal that is not going to play well at the National Association of Realtors headquarters.

After an analysis of home prices in California between 1980 and 2010 he found that the investment was a very poor one compared to that same money being invested in the Dow Jones Industrial Average over the same period of time. And to be honest the numbers do look pretty brutal.

The median price, single family home in California appreciated from $99,500 to $296,830 over that period of time. An average of 3.6 percent. That same investment of $99,500 in the DJIA would have been $1,143,255 according to his calculations.

Ouch…

Here is another calculation Bridges offers in the article:

Here’s another way of looking at the situation. If a disciplined investor who might have considered purchasing that median-price house in 1980 had opted instead to invest the 20% down payment of $19,910 and the normal homeownership expenses (above the cost of renting) over the years in the Dow Jones Industrial Index, the value of his portfolio in 2010 would have been $1,800,016. The stocks would have been worth more than the house by $1,503,196. If the analysis is based on 2007, the stock portfolio would have been worth $2,186,120, exceeding the house value by $1,625,850.

Read the rest of the article, A Home Is A Lousy Investment, here.

So what do you think?

My opinion is that a home is more than an investment. It is the place that is central to a family. A sense of stability in a crazy world. A place for family. Maybe the homes role is not to be the families biggest investment but the place we all come together.

I can live very happily with that.

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California Homes Are A Lousy Investment?