Housing market beats stocks but not bonds, gold

The blue line shows how house values have compared with stocks over time.  (Source: Radar Logic)

A missive from the Radar Logic data firm the other day gave me some information that surprised me and may surprise you as well.

The firm, which tracks home prices in 25 major metropolitan areas, says its RPX Composite Price index grew by 56 percent from January 2000 to July 2011.  “This compares quite favorably to the major stock market indices,” Radar Logic declared.

Over the same period, it reports, the Dow Jones Industrial Average increased by just 12 percent and the S&P 500 fell 8 percent.

The housing market has done mostly better than the GDP.  (Source: Radar Logic)

In addition, the housing market performed about as well as the overall economy in 2000-2010, according to the firm.

Where housing has not shone is in relation to bonds and gold, Radar Logic notes:

[B]ond prices were given an unprecedented boost by the Federal Reserve in response to the financial crisis. Without the Fed’s intervention, this picture might be reversed.

As for gold prices, they have slipped from their high of close to $1,900 an ounce to a bit above $1,700, having soared from around $300 a decade ago. Nothing is going to beat that meteor, though we might expect further decreases if past is precedent and if the global economy manages to recover.

Despite how avidly I follow the housing market, I must acknowledge that Radar Logic’s numbers have taken me aback — with some important qualifications:

The time period that the firm has chosen ignores the fact that homeowners in the past move –that is, sell and buy — an average of every five to seven years, and so many of them have been tragically damaged by the housing crisis that has gripped most of the country for the last four years or so. They didn’t buy in 2000; they bought close to the U.S. market’s peak.

In other words, the returns over a longer period time are beside the point as far as they are concerned.

There are plenty of other caveats: The fact is that the Federal Reserve did intervene in the bond market, stock prices did recover this year and the housing market did crater.

Yet. . . let’s also recall that the houses that we buy as our homes should not ever have been and never should be viewed as investments. They provide shelter and allow us to benefit from the value they add to our lives year after year without throwing rent money down the toilet.

Tomorrow: Weekly Roundup

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Malcolm Carter
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022

M: 347-886-0248
F: 347-438-3201

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