by On Alphaville, Matthew Klein discusses recent work by Jorda, Knoll, Kuvshinov, Schularick, and Taylor (“The Rate of Return on Everything, 1870–2015“) according to which Residential real estate, not equity, has been the best long-run investment over the course of modern history. … but they didn’t calculate the returns most homeowners actually experience. Most people borrow to buy housing and most people live in their properties without renting them out. This makes a big difference. … Net rental income has historically accounted for half of the total returns from owning housing. It’s also far less volatile, dramatically boosting the Sharpe ratio compared to what you would get just by looking at changes in house prices. Housing has beaten stocks since 1950 because rental income has been
Topics:
Dirk Niepelt considers the following as important: equity, Notes, Real estate, Rental income, Return, sharpe ratio
This could be interesting, too:
Joseph Y. Calhoun writes Weekly Market Pulse: Are Higher Interest Rates Good For The Economy?
Dirk Niepelt writes SNB Annual Report
Dirk Niepelt writes Banks and Privacy, U.S. vs Canada
Dirk Niepelt writes Bank of England CBDC Academic Advisory Group
On Alphaville, Matthew Klein discusses recent work by Jorda, Knoll, Kuvshinov, Schularick, and Taylor (“The Rate of Return on Everything, 1870–2015“) according to which
Residential real estate, not equity, has been the best long-run investment over the course of modern history.
… but they didn’t calculate the returns most homeowners actually experience. Most people borrow to buy housing and most people live in their properties without renting them out. This makes a big difference.
… Net rental income has historically accounted for half of the total returns from owning housing. It’s also far less volatile, dramatically boosting the Sharpe ratio compared to what you would get just by looking at changes in house prices.
Housing has beaten stocks since 1950 because rental income has been better than dividend income, not because house prices have grown more than stock prices.