If I were to evaluate my investment return on real estate, I am sure that I would be sorely disappointed. We bought our first house in 1985 for a little more than $60 thousand and felt lucky to get out of it 6 years later for a little over $80 thousand. Hardly a great return, when you consider we built a garage, waterproofed the crawlspace, and remodeled the master bathroom. All in all it was a decent starter house and a great opportunity to learn about moisture problems, aluminum windows, and a septic system.
Our next and current home was a two-story with a basement on a large lot. We stretched to buy it in 1991, but it still serves us well with a good neighborhood, proximity to shopping, and a first rate elementary school within walking distance. Nine years after moving in, we installed an in-ground swimming pool, deck, and hot tub in the back yard. We have also updated the kitchen, installed several new windows and doors, improved the electrical system, and replaced the entire heating and cooling system. If you add up all of the improvements with the original cost, we would be very lucky to get our money out of our current home.
The author in this Wall Street Journal article concludes that a home is a lousy investment. From a purely financial perspective that is undoubtedly consistent with my experience, but there are several intangible benefits to home ownership that are not readily quantifiable. In any event, he has presented a very interesting perspective that questions the macro benefits of government support and promotion of home ownership. It has traditionally been among the many third rails of politics to assail the government’s role in housing, but work like this should give policymakers food for thought when they evaluate housing reform in the coming months. Robert Bridges: A Home Is a Lousy Investment – WSJ.com