An actual high yield savings account right now gives around 2% nominal interest which is less than inflation.
The economist chart of house prices from the article certainly seems to show them outpacing inflation recently. Looking at an index since 1900 is a bit misleading since public policy changed dramatically in the 1950s-70s to constrict supply and juice demand.
The inflation rate in 2019 was 1.76% [1]
> The economist chart of house prices from the article certainly seems to show them outpacing inflation recently. Looking at an index since 1900 is a bit misleading since public policy changed dramatically in the 1950s-70s to constrict supply and juice demand.
Ok, then look at it from 1970... The results are even worse
Every coping strategy has it's limit. You can't commute more hours than there are in the day. YOu can't have more than 3 people living per room (at least not legally). Once you move in with your parents, you can't do it again. etc. I think we've reached that limit in the bayarea (at least the core bay area) so we can look forward to housing returns of roughly inflation.
Even with the severe dystopian restriction on supply, it will just force more and more people out of the bay area.
Maybe some of the outskirt areas still have room to go up, like Tracy, antioch, brentwood, etc. some of those places haven't yet been gentrified.
Why do you think houses are going for 2 m$ in the bay area? Because the expectation that it goes up is already priced in. Also a good reminder that the return of the past are not an indication of future returns.
Buying in the bay area is de facto a speculative investment as rents are comparatively way cheaper. The only incentive for buying at those prices is the hope to sell it for even more to someone else later (see also, the greatest fool theory).
Housing in SF was pretty much flat from 1990-1998. It went down by ~30% in 2008 and took 10 years to match the peak in 2006.
As others point out, houses can be easily setup in and around the metros to give a steady 3% return not including appreciation. Considering dense living is the future and the house will materially remain through a market downturn, why wouldn't you diversify your portfolio with a few?
FWIW, broad-market index funds hold REITS, which give you a market-weighted chunk of the RE market. No need to "diversify" into RE. Doing so only skews your portfolio to be overweight in RE.
[1] https://en.wikipedia.org/wiki/Case–Shiller_index#/media/File...
ETA: I wonder why this is such a common belief? Is it because most HN (myself included) readers live in booming real-estate markets like NYC and SF? Those markets have done very well in the past 10 years. But remember: places like Detroit, Atlanta, Chicago, and Cleveland also exist.