[Alberta's Child]

The irony is that homeownership is an awful investment opportunity in many respects. When I bought a home last year it would have violated every sound practice I apply to prospective investments:

1. I don’t borrow money to invest.

2. A home is a very illIquid asset.

3. A home has a negative cash flow — which means it functions more like a LIABILITY than an ASSET.

4. There’s no diversification in a home. As one astute real estate developer client once told me: “If you want to be a real estate investor, you’re better off investing in a REIT.”

[Clemenza]

True, although my dad made a killing on the Long Island house he bought in 1981 (my childhood home) and the Boca Raton house he bought in 1990. Will be interesting to see what happens once the boomers leave the scene and there are less families to buy single family housing.

You are correct in that in terms of housing as an alternative to stocks and fixed income investments, REITs will usually give one the better return. However if you live in an area of the country where there is little land left to build on and need a place to live for several years, you can still do well on your own home once you decide to move.