A Home Is A Lousy Investment - could it be that I agree?

There is no disputing Robert Bridges article in the Wall Street Journal is a must read and quite informative.  

Let's expand a bit on some of the concepts and thoughts.  Do we understand there are two totally different processes for buying a home compared to buying property?  When will our yearning for a national real estate index wane and thus Mr. Bridges wish in the final paragraph can begin to come to fruition.  

We need to understand there are real estate investors buying "properties" for a profit and that we are buying "homes" for a future.  The fact this article has to be written speaks to how far things swelled up in the early part of the century.  Real estate investments can be compared to the major indices (think REITS, real estate partnerships, etc); homes cannot and should not be.  That is not the primary reason for them.  You buy a home to build a foundation for you and your family, to squelch your desire to meet new friends and share good times, to make a difference in a local community, and of course to feed your hoarding addiction.  

We are constantly trying to find the index or indices that reflect the appreciation and investment return on our homes from a national perspective.  The problem is, the value of a home is inherently tied to the community in which its concrete is poured.  A home is anything but a national statistic. 

Take for example a local community dependent on tourism or a community dependent on one particular industry?  The idea that we can examine the real estate market nationally lies at the root of the issue of us considering it as a financial investment worthy of being compared to the equity markets.  


Take two towns 90 miles apart from each other.  We'd all agree in today's world, 90 miles is a lot of people's daily commute.  Price a home in New York City and price a home in Philadelphia and you'll see property values 5X's greater in New York City.  That's right 4 bedrooms in Philly $500,000, 4 bedrooms in New York City a cool $3 mil.  That's comparing two major cities just 90 miles from each other.  Now try comparing the local economy of a Santa Barbara, CA to the local economy of a Pittsburgh, PA.  

The point being, there is no magical national index for us to look at and review.  The homes that create the market create the very communities, neighborhoods, and block parties that we are in search of when searching for our perfect nest egg.  Buying a home is a contact sport.  Get out there, get local, and talk to the local experts.  That's how you buy a home and build the foundation for your wealth.  Not by researching graphs, earnings per share, book value, and by simply clicking "confirm trade".