Friday, August 19, 2005

Stocks Outperform Real Estate

In today’s NY Times there is an article that demonstrates why stocks are a better investment than real estate over the long term. I always thought that this was obvious, but I guess not. Of course, real estate often has value as shelter that stocks do not have as the article points out.

“The housing boom of the last five years has made many homeowners feel like very, very smart investors.

As the value of real estate has skyrocketed, owners have become enamored of the wealth their homes are creating, with many concluding that real estate is now a safer and better investment than stocks. It turns out, though, that the last five years - when homes in some hot markets like Manhattan and Las Vegas have outperformed stocks - has been a highly unusual period.

In fact, by a wide margin over time, stock prices have risen more quickly than home values, even on the East and West Coasts, where home values have appreciated most.

When Marti and Ray Jacobs sold the five-bedroom colonial house in Harrington Park, N.J., where they had lived since 1970, they made what looked like a typically impressive profit. They had paid $110,000 to have the house built and sold it in July for $900,000.”



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