Your house may not be a good financial investment

That's the view of Yale professor Dr Robert Shiller

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Many Americans have substantial portions of their net worth tied up in their place of residence. While housing brings benefits both tangible (a place to sleep) and intangible (a sense of security and belonging to a community), one thing it has not historically offered is solid capital gains appreciation.

That's what one of the leading experts on U.S. housing, Yale professor Robert Shiller, told The Motley Fool last week when he was interviewed in front of a live audience at Fool HQ.

Robert Shiller knows a thing or two about house prices, having leant his name to the US index that measures 20 US cities – the S&P / Case-Shiller Home Price index.

Shiller, author of the new book Finance and the Good Society, explained his findings. Click here for a video of the exchange.

The transcript is below.

The Motley Fool: How do you think we should be thinking about the purchase of a home? Is a home an investment?

Dr. Shiller: "Well a home is definitely an investment in the sense that for most people it's the main part of their wealth, and it's something that they might rely on if there's an emergency. You could sell the house and pay for something that's more important to you. But the question whether it's an investment may have another nuance to it. The question is, is it a good investment in the sense that it will return you financially.

Now the thing is that a lot of the benefits you get from housing are in kind. That is, you can live there. You might like it or you might not, right? We're all different, so it's not like other investments that are fungible, that you can measure; it's different for different people. But you can measure the capital gains part of housing. There's also a tax advantage that might be removed, by the way, but currently there is a tax advantage to home ownership.

But the capital gains component I think is overrated. Because my data show that from 1890 to 1990, 100 years, there was virtually no real inflation-corrected appreciation in home prices. And I think those people in 1990 should count themselves as lucky that they ended flat, even, because it could well have gone down.

There's no guarantee that home prices are going to go up. I think we've gotten into an illusion about that."

If you're looking for ASX investing ideas, look no further than "The Motley Fool's Top Stock for 2012." In this free report, Investment Analyst Dean Morel names his top pick for 2012…and beyond. Click here now to find out the name of this small but growing telecommunications company. But hurry – the report is free for only a limited period of time.

More reading

The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691).

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »