> home prices adjusted for inflation literally went nowhere Yes, but what does that mean for money invested in houses? The reason this is not the same questio

> home prices adjusted for inflation literally went nowhere Yes, but what does that mean for money invested in houses? The reason this is not the same question is that money invested in houses is leveraged, at least in the short term. Simple example of how this can work: You buy a house at 20% down and an interest-only mortgage with a fixed interest rate of 4%. Inflation averages 3% and your house's price grows at exactly inflation. You live there for 40 years and then sell. To make our numbers simple, let's say the initial price was $100k. So you put $20k down and take out a $80k loan. Each year you pay $3.2k in mortgage interest. The price of your house after 40 years is, in then dollars, $326k. You sell, pay off the $80k loan, and have $246k left. Let's consider the alternate situation: you rented for those 40 years. How much did you pay for rent? Chances are, it's no less than the interest on your loan (if only because a landlord would have that interest _and_ other expenses). In practice it probably went up over time, unlike your payments, but let's pretend it didn't. You invested your $20k downpayment in the stock market. What nominal return do you need to get to end up with $246k at the end of 40 years? The answer is about 6.5%. If inflation really averaged 3%, then that's a pretty decent stock market return, and that's all assuming that the capital gains treatment of the house and the stocks is the same (it's _not_ in the US; houses are exempt from capital gains tax to a large extent). Obviously if you actually pay off your house all this goes out the window. ;) Likewise, if the house goes _down_ in price the leverage acts against you. Realistically, houses are an awesome investment if you buy at a time of low-ish interest rates, and then before you've really paid off a large fraction of the house inflation spikes. If house prices simply keep up with inflation in that situation, you can really win out. People who bought in the US in the 60s and sold in the 80s or 90s did quite well, on average.