Dan Kopf puts together some interesting takes on a recent research paper writes some Housing was the world’s best investment over the last 150 years.
This is the argument of a groundbreaking new paper from economists at University of California-Davis, University of Bonn, and the Deutsche Bundesbank (the central bank of Germany).
In a feat of extraordinary data collection, the researchers pulled together the annual returns of treasury bills, treasury bonds, equities, and residential housing from 1870 to 2015 for 16 now-rich countries such as the US, Germany, and Japan. The dataset is the first of its kind.
They find that, in the average wealthy country, the annual return on housing during that period was just over 7% when adjusted for inflation, while the return on equities was just under 7%. At the same time, the risk associated with housing was far lower.
By standard measures of uncertainty, housing was about half as risky as equities, and slightly less risky than bonds.
The really interesting conclusion from the article is the value of buying multi-family real estate.
The study’s findings are more useful for investors who can consider investing in multiple residential properties than they are for individuals (or individual families) who would likely be buying just one home. A single home is a much riskier asset than a diverse portfolio of residential real estate.
It is definitely worth a read.