Real Estate After Ten Years

We’ve just had the biggest boom and bust in real history in recent history.  Nevertheless, real estate has still greatly outperformed the stock market over the past ten years.

The bust was not enough to wipe out the early gains. That’s just interesting.

Comments

  1. Maybe the bust hasn’t finished.

  2. Mike Mandel says:

    *Maybe the bust hasn’t finished*

    That concerns me too.

    • Of course the bust hasn’t finished.

      All baby boomers will start to turn 65 after 2011. There are more people turning 65 in America, than turning 22.

      Real estate, in inflation adjusted terms, will not rise in the entire 2011-2020 period.

      The apparent plateau of prices are due to 0% FF rate and the $8000 credit. Take those two things away, and the correction resumes.

  3. The bust in housing or in stocks? One should expect real assets to increase with inflation and with falling long term interest rates so while housing may be a little high it is not much, stocks OTOH are subject to speculative cycles that can last up to 20 years so we may only be halfway through it.

    • CompEng says:

      And yet movement in stocks are at least tracked to real economic activity. A 10-year lack of movements in stocks is a powerful blow against the popular model of how retirement is “supposed” to work.

  4. Michael,

    Taking stocks starting from July 2000 is unfair.

    The real comparision would be to take both housing and stocks from 1982 onwards. Let’s see what the comparison is like over these 28 years. 1982 is when stocks started to rise, and is also when interest rates started to slide inexorably.

    A persistently see you taking too short of a scale on the x-axis, on such charts.

    • It’s not *that* unfair. After all, if things only look good when you pick the dates you like, that’s not particularly encouraging. And if 10 years is really considered “short run”, that in itself is pretty informative. That’s, what, a quarter of the average working career? My 401K should have doubled already, or so all the financial planners were telling me when I got married🙂

  5. Not very interesting and in fact obvious if you look at the previous decades like T5H asked for. The S&P 500 went up 15 times in the previous two decades and peaked in 2000, while real estate basically languished for those same 20 years before taking off in the late ’90s. Obviously as the dot.com bust dragged stocks down, investment rushed into the rising real estate market instead, as investors were too stupid to think of better places to invest. However, it doesn’t much matter what happened this decade, what matters is what happens next and real estate will be a horrible investment over the coming decades, given how the internet is decentralizing everything. Stocks will do far better, though over the longer term even stocks are an outdated model and will be replaced with better ways of investing in business, but business investment of some sort will be paramount.🙂

  6. Stocks have been resting for ten years, now its real estates turn to take a decade off.

  7. Mike Reardon says:

    This decade also had the extraction of real production and manufacturing from the economy. I never held bubbles or low interests rates against the Fed, they were compensating for the fact the transfer of wealth was taking place.

    I don’t think housing can go down to its historic ratios again. But its not that demand has to hold some level above what was the norm. There is a better chance of removal of housing holding the price from here out. Employment and wages are going to be under pressure for more than the next few years.

  8. David Kerr says:

    I certainly would not buy the S&P 500. It has no place in an Obama proof portfolio. When the democrats won control of congress, just under four years ago, a prudent investor switched to international stocks, excluding Europe, U.S. and Japan. The stock chart of EEM vs. real estate shows an Obama proof portfolio to be superior.

  9. David Kerr says:

    For a risk free investment you won’t lose sleep over, buy oil stocks in the etf ticker IYE or oil drillers ETF xes. Oil will be going back to $140 per barrel. It might even triple if Israel bombs the Iranian nuclear bomb program sites.

    Real estate is a sure fire loser nationally, but may do well in some locations.

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Trackbacks

  1. […] why investors have been snapping up single family homes? This graph from Mike Mandel might explain a […]

  2. Taylor Crary says:

    […] and current Senior Fellow at Wharton’s Mack Center for Technological Innovation, had to say: We’ve just had the biggest boom and bust in real history in recent history. Nevertheless, real […]

  3. […] at BusinessWeek and current Senior Fellow at Wharton’s Mack Center for Technological Innovation, said: “We’ve just had the biggest boom and bust in real estate in recent history. Nevertheless, […]

  4. […] and current Senior Fellow at Wharton’s Mack Center for Technological Innovation, had to say: We’ve just had the biggest boom and bust in real estate in recent history. Nevertheless, real […]

  5. […] and current Senior Fellow at Wharton’s Mack Center for Technological Innovation, had to say: We’ve just had the biggest boom and bust in real estate in recent history. Nevertheless, real […]

  6. […] Don’t take my word on this. This is what Mike Mandel, former chief economist at BusinessWeek and current Senior Fellow at Wharton’s Mack Center for Technological Innovation, had to say: […]

  7. […] and current Senior Fellow at Wharton’s Mack Center for Technological Innovation, had to say: We’ve just had the biggest boom and bust in real estate in recent history. Nevertheless, real […]

  8. […] and current Senior Fellow at Wharton’s Mack Center for Technological Innovation, had to say: We’ve just had the biggest boom and bust in real estate in recent history. Nevertheless, real […]

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