‘Home Is Not An Investment Vehicle’
Congratulations to Robert Shiller for winning the Nobel Prize!
Trish Regan: “Then why buy a home? People trap their savings in a home. They’re running an opportunity cost of not having that money liquid to earn a better return in the market. Why do it?”
Robert Shiller: “Absolutely! Housing traditionally is not viewed as a great investment. It takes maintenance, it depreciates, it goes out of style. All of those are problems. And there’s technical progress in housing. So, new ones are better…
“So, why was it considered an investment? That was a fad. That was an idea that took hold in the early 2000′s. And I don’t expect it to come back. Not with the same force. So people might just decide, “Yeah, I’ll diversify my portfolio. I’ll live in a rental.” That is a very sensible thing for many people to do.
“If you think investing in housing is such a great idea, why not invest in cars? Buy a car, mothball it, and sell it in 20 years. Obviously not a good idea because people won’t want our cars. It’s the same with our houses. So, they’re not really an investment vehicle.”
Reasons to Own:
Security of knowing where you will be living.
Security of tying down the major housing expenses.
- The prospect of not having a mortgage payment someday.
- Certainty of having the kids grow up in the same house.
- Make your wife happy! (Shiller said it again in this video).
None of these may have much, if any, investment value. Can we stop talking about housing as an investment? Why are we addicted to that conversation? Buy a house because you need a place to live.