Saturday, January 26, 2008

Real Estate Stinks!

I woke up way too early on a Sunday morning, and since all the buzz in India and back stateside has been on the real estate market, I was curious what the historical returns on residential real estate have been. While no data exists in India, I found a study for the US, from which I reproduce this graphic on nominal and real (i.e. inflation-adjusted) returns. Nothing to write home about.


To be fair, this study does not appear to factor in rent savings, which could be substantial. My own experience with online calculators is that there is a huge disparity based on assumptions, so do your homework. Nevertheless, it is useful to consider that home price inflation has only barely beat inflation in much of the US, a far cry from the 10-20% annual returns we have seen recently.

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