By Gino Blefari
President & CEO
Intero Real Estate Services, Inc.
Results from a new Gallup poll out this past month show that Americans still view owning a home as the best place to park their hard-earned cash for the long term. And of course, opinion writers jumped on the chance to point out holes in the thinking.
Results from an April 3-6 Gallup poll on the Economy and Personal Finances showed that 30% of Americans saw real estate as the top long-term investment, up from 25% a year ago. This follows a February survey from Fannie Mae that showed Americans’ positive views on housing.
One Washington Post writer was quick to point out the pitfalls of real estate as a long-term investment, quoting research from Robert Shiller that shows housing’s return paling in comparison to stocks and other forms of investment.
“Over the past century, housing prices have grown at a compound annual rate of just 0.3 percent once one adjusts for inflation, according to my calculations using Shiller’s historical housing data. Over the same period, the Standard & Poor’s 500-stock index has had comparable annual returns of about 6.5 percent.”
We’ve heard this argument before. And while you can’t argue with arithmetic, there are two very large considerations missing: one, real estate is local. We cannot stress this enough. While the national median price may have shown only incremental increases, individual markets often tell very different stories. For instance, if you had bought a house in Sunnyvale, California, in the 1960s, as my parents did, you probably would’ve paid less than $20,000. Today, that house would be worth approximately $1.5 million. Just think, if they had continued to rent, how much money would have gone down the drain over the last 54 years.
The other consideration that is constantly missed in the “housing is a bad long-term investment” argument is lifestyle – something you can’t quantify with numbers, charts and graphs. By succumbing to a lifetime of renting in order to keep your money tied up in the stock market, you’re also signing up your family for a lifetime of uncertainty. You have no control over your monthly housing costs. And you have no control over surprise letters in the mail stating it’s time to move because the landlord decided to sell.
This is why housing will always be top of mind for Americans when they think about where they want to invest their money. Because at the end of the day, it’s about more than money. It’s about security, controlling your own destiny, and rooting your family in a certain lifestyle. For these reasons, and though it may defy logic when put to long-term graphs, housing is and will be the best investment for the majority of Americans.