Encore: Why the decline in homeownership is bad for Americans

Somebody breezed into my office last week convinced that people are making a serious mistake by investing their money in a house. She pointed to the low long-run return on the Case-Shiller house price index and concluded that everyone would be better off if they invested their money in equities instead.

This conclusion seems wrongheaded for so many reasons that it’s hard to know where to start.

Perhaps, the return to housing might be a good place to begin. Yes, a leading house price index has averaged just 1% growth over the period 1968-2018, but the increase in the house price (P) is only one component of the return to housing.

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