A Home Is NOT an investment vehicle.

Hopefully, this doesn't turn into a screaming rant. But I needed to get this concept into the blogosphere.

Point 1
Traditionally, single family home real estate was NOT meant to be an "investment vehicle". Single family homes were meant to be ... well ... homes! Places you live in for 10, 15, 20, even 30 years. That was the tradition. That's how mortgages were originally designed.

Point 2
Most everyone has forgotten the lessons learned from "greed gone wild" of the late 1990's dot com boom and bust. Do you remember? During that time people wanted so desperately to make easy money that they were willing to drop almost any amount of money into almost any type of dot com company.

Wall Street experts were quick to point out all the problems with investing in these untested technologies. "Sure they're cool," they said, "but as you're unsophisticated investors. You'll lose everything. You should leave the investing to the professionals."

Well, guess what, this time around with the real estate bubble, we allowed the "professionals" to create these new types of investments. And as we eventually discovered, these real estate securitized investment vehicles were built upon the same type of bogus promises that the dot com companies used in the late 90's. Only the stakes were MUCH bigger. When the dot com bubble burst, individuals lost their money. When the real estate bubble burst, EVERYBODY is losing. ARGH!

OK that was a screaming rant. Sorry. Let's go back to basic here.

Back to Basics
If we look at real estate as a home - not a highly volatile stock investment - a different picture is apparent. Pricing for residential real estate have risen at a steady, NORMAL price increase. For example, let's look at the San Jose DMA. Here you can see a steady 4% increase in price over time. (Source: Zillow.com)


And, as we begin 2009 and move forward, the prices of housing will undoubtedly rise, albeit at a similar steady growth rate.

Additionally, homeowner equity is continuing to rise as seen in the graph above. (Source: Zillow.com)

As real estate professionals, educate your clients about this. A house is a home that builds equity over a long period of time. A house is NOT an investment vehicle with a 12% year over year return on equity.

If you're in the Santa Clara, San Mateo, San Benito, Monterey or Santa Cruz counties, your REALTOR(r) associations should be able to help you with these statistics. MLSListings, the MLS is always ready to help as well.