I've owned three houses in my life. They've all been terrible "investments", including the one I'm sitting in right now, and I haven't a clue when I'll sell it.
Think about a house as an investment. Historically, residential real estate returns maybe two or three percent annually, after inflation. That's actually not terrible, especially if you don't owe taxes on the sale. But it will cost you at least five percent in various transaction costs. We're not selling IBM shares, after all. While you own this "investment" you risk fast depreciation, (it burns down,) and slow depreciation, (the roof wears out.) Those are real dollars to keep the investment "working for you," as they say.
More abstractly, you severely limit your career. You can't move cross country with this asset. You also can't inexpensively change your child's school. I know, you bought the house for the good schools. That was ten years ago. They had a great kindergarten! The high school is full of hoodlums.
Sure, you get to live there for free. But, you tie up cash with a down payment. You limit your flexibility to invest in other things. You also buy too much of it because you perceive value that likely isn't there. (Remember, that tax deductible interest holds for ANY investment, not just housing.) Bottom line: renting probably works best for most people.
Wait, you say, I know lots of people, (like my parents!) who made a lot of money on their house. First, they're thinking about their nominal returns, not their real returns. Owning ANYTHING through the '70s and early '80s had huge nominal price appreciation. The $0.10 Hershey bar of my childhood is the $1.25 for my kids. It's still just a Hershey bar.
Second, they're forgetting that they leveraged themselves up five times with a mortgage. As any banker will tell you, leverage works for anything when prices rise, not just real estate.
So, what's the leading indicator that says it's time to buy a house? Insurance companies want to buy your house! Insurance companies, in my experience, have pretty good long term investment track records. They also understand real estate. Life insurance companies built most of it in the first place.
How do I know they want to buy your house? The business plans crawling from the woodwork. Several start-up operations have formed to write insurance, or something like insurance, that protects you, the homeowner, from falling prices for your house.
Why do insurance companies want to take this risk? Here's the cool part. Property and casualty insurers have huge inflation risk. When prices go up, their claims expenses go up. For example, the Gecko gave you a low priced quote for auto insurance. He estimated that your car that cost you $25k would cost $26k if you totaled it nine months later. He carries the risk that it costs $27k. Worse, the guy you hit sues you. The Gecko knows (trust me!) what that's going to cost in legal bills over the next two years, unless inflation strikes hard, and your lawyer and his lawyer raise their prices. You get the idea?
They need a way to hedge this risk. Your fear of prices falling solves their problem! You buy insurance, giving them more cash to invest, and pay future claims if inflation picks up. But, if inflation picks up, they don't have to pay your claims. This works the same way that banks hedge to reduce their cost of storing risk.