Long-Term Housing Effects

For decades, people considered their homes as not only a place to live but as a key investment that was likely to return a great deal of value. But the crash of the real estate market was so thorough that it has more or less put an end to that thinking. 

Two economists writing for the Federal Reserve Bank of Philadelphia have recently worked to quantify this. Between 1975 and 2009, they found that the real rate of return for a home - according to the national average - has been a mere 1.3 percent a year. 

But, the economists point out, the numbers in real life aren't even that good. Calculating in the effects of depreciation, mortgage interest, income taxes and property taxes (which they figured at just 1.5 percent - clearly they don't live here in New Jersey), they found that the real rate of return on a typical house was actually below zero. They figure that a homeowner could have expected, over those 35 years, to lose 0.575 percent per year.