Home ownership is one of the greatest financial investments you can make, right?  Wrong!  The chart below shows that once you adjust for inflation, home prices have been essentially unchanged over the past 100+ years except during a few spectacular bubbles.

housing-real-dollarsIn a recent interview, Professor Robert Shiller delved into the popular misconception that home ownership is a good “investment”.  Via the Motley Fool article:

“The housing boom in the early 2000s was driven by a sense that housing is a wonderful investment. It was not informed by good history,” he said. Most people now agree on that much.

“If you look at the history of the housing market, it hasn’t been a good provider of capital gains. It is a provider of housing services,” he explained.

By that, he means a home gives you a place to live, a place to sleep, a place to store your stuff.

But that’s it. Americans believed — and still believe — that the value of their home will increase above the rate of inflation.

And that, Shiller says, is wrong.

“Capital gains have not even been positive. From 1890 to 1990, real inflation-corrected home prices were virtually unchanged.”

Source: TMF