Buy a House? The "Best Leading Indicator" Says Yes!

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.