Why we concluded that buying a home is too risky

The Washington Post reports:

We tasted the promise of the American dream as we toured the townhouse in suburban Atlanta.

“If you want this house at all, make an offer before leaving today,” our Realtor advised. This is a popular neighborhood, and houses typically sell within days.

Yet my husband and I still rent.

This decision equates to throwing away money every month, or so people warn. But before spending our savings on a house, we did some calculations and reached a startling conclusion: Houses are a riskier investment than people claim.

“A lot of people have an exaggerated idea of likely future appreciation,” said Robert Shiller, professor of economics at Yale University. Shiller won the 2013 Nobel Prize in economic sciences and co-created the Case-Shiller Index of U.S. house prices.


His research of home prices from 1890 to 1990 shows that, adjusted for inflation, home prices increase by less than 1 percent a year. A housing bubble has come and gone since then, but the fact of home prices remain: “It’s going in a seesaw pattern,” Shiller said.

That means on average, home prices in the United States increase by the same rate as inflation.

Home sweet home.