I was surprised to read in a recent article from the Motley Fool that the the actual appreciation rate of residential real estate over a long period of time, in their study they looked at two time periods, barely beat Treasury bonds in one case and lost to T-bills in the second case. In the period from 1963 to 2005, residential real estate returned 1.73% (inflation adjusted) compared to Treasury bills returning 1.44% over that period, stocks returned 5.84% and bonds returned 3.18% over that same period. They also looked at any ten year period over that time and saw that appreciation reach 1.62% compared to 6.47% from stocks.
Read the article if you’re a numbers type of person but the article really does illustrate something most of us probably wouldn’t have thought of on our own, that residential real estate was out performed by bonds and barely beat Treasury bills (it’s almost a given that stocks outperform real estate).
So, what does that mean for your retirement? If you don’t have a 401K or any other retirement assets and were hoping to lean on the appreciation of your house, that may not be the best strategy because you would do better to take that money and put it in an index fund.
Source: Yahoo Finance
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