Yes, but this is cherry-picking. In the US as a whole, RE typically matches the inflation rate. Some physical and temporal locations over- (or under-) perform. But in aggregate, that's the reality. There's no way of knowing ahead of time which market will out-perform. Investing in Bay Area real-estate today very well could continue to out-pace inflation. But that seems as big a risk as dumping $1M into Tesla stock today.
From:
https://www.zillow.com/homedetails/3203-Benton-St-Santa-Clar...
Neighborhood home value
95051 home values have fallen 8.3 % over the past 12 months. One-year prediction
Zillow predicts the home values in 95051 will fall 9% in the next year.
http://www.stock-market-crash.net/wp-content/uploads/2012/06...
And AFAIK, generally rents are lagging behind house prices and are more sticky. If you're a prospective buyer and houses are loosing and are projected to loose hundreds of thousands of dollars each year, that's pretty big incentive to stick around in your rental and wait.
And "forever" often turns into couple of years because of health problems, job opportunities, personal events, and so and so.
The only reason why houses cost as much as they do is historically low mortgage rates https://www.macrotrends.net/2604/30-year-fixed-mortgage-rate... . And if this (mean reverting) trend is to revert any time soon...
I don't know what actually is going to happen. And maybe FED will eventually decide to hyperinflate the crashing credit bubble which would be great for people with big mortgages. But people that live in oblivion thinking that's the safest investment ever, are completely clueless. But maybe they'll be lucky. :)
Meanwhile here I am in my little city with barely more than 100k people spending less than 1/3 of my income per month with the help of a stable government job. I could get more if I wanted simply by working at the largest employer in town. So why move?
> It's taxed every year, regardless of whether you actually earn any money on it (aka: sell it)
Property tax is generally lower than your imputed rent. In the US at least, there is a huge advantage of being shielded from capital gains taxes (up to $500k if married)
> Returns are relatively low, roughly in-line with inflation
This is market dependent. SF Bay is something like 5.4% nominally over the past 30 years, which crushes inflation. Housing prices in the Bay Area in fact imply heavy future price appreciation. [1]
Also, the high leverage position (which you point out cuts both ways) does drive expected returns above inflation. Especially with, in the US, interest being somewhat tax deductible.
Also strongest advantage of owning a house over renting is the stability you get. My rent can always go up, potentially above my ability to pay; my ownership costs (esp. in CA with prop 13 limiting property tax rise) only barely goes up. (and far less than inflation)
[1] https://medium.com/@usaar33/why-you-shouldnt-buy-a-home-in-t...