CNBC’s Spring Real Estate Outlook 2011: Home Ownership Losing Allure – CNBC

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Home Ownership May Be for the Few, Not the Many
CNBC.com | March 14, 2011 | 09:00 AM EDT

Homeownership has long been associated with investment savvy.

Tax breaks, equity growth and the sanctity of the American dream — the real estate community has made a pretty compelling case over the years for the merits of purchasing property versus throwing your money away on rent.

But as the housing market redefines itself in the wake of the subprime mortgage crisis and the ensuing industry recession, a number of economists who follow the industry suggest the benefit of buying no longer applies. Others say it never did.

Yale economist Robert J. Shiller, whose book “Irrational Exuberance” accurately predicted the stock market collapse in 2000, notes that U.S. housing prices posted roughly a zero percent gain between 1890 and 1990, after adjusting for inflation.

“That’s the remarkable thing that most people don’t realize,” he says. “This is not a financial investment. It’s an investment that provides you services and you have to answer for yourself how you value that.”

The biggest dividend of real estate, says Shiller, is the lifestyle it affords. Some are willing to pay a premium for kid-friendly neighborhoods, quiet streets, a historic home or a condo close to work.

But taking the plunge today is a bigger financial gamble than it once was.

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