Jason Zweig recently suggested that homeowners make far less money selling their houses than they believe. He cites Yale University economist Robert Shiller's data, which finds that “real estate generally keeps pace with inflation but seldom offers any return premium above that.”

Homes have done a bit better than that, but not by much. The S&P/Case-Shiller U.S. National Home Price Index, which measures the changes in value of single-family homes, has grown at a real rate of 1.1 percent annually since 1975. In reality, even this pittance overstates homeowners’ fortunes since it doesn’t account for the myriad expenses that also accompany homeownership and eat away at returns.

So how did homes get confused with goldmines? It turns out that a short-lived period of unusually high returns is to blame. As expected, that period coincides with the boom years of the real estate bubble, but the seeds were planted during the tech bubble that preceded it. This becomes apparent when looking at the NHPI's rolling ten-year real returns.

The average annual ten-year return was 1.1 percent -- the same as the NHPI’s long term annual return. The standard deviation, or volatility, of ten-year returns was 1.9%. This means that 95 percent of the time, the ten-year returns can be expected to be between -0.8 percent and 3.0 percent.

David Fuller's view

A graph in the article above is compelling but I would like to see more back history, and also for more countries.  Also, there is always the location-location-location argument.  For instance, London has been blessed or cursed, depending on whether one owns a home or rents in this city, because it is fashionable and wealthy people from all over the rest of Europe and beyond have been fleeing their native countries.