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Contrasting Real Estate with Comparable Investments, 1978 to 2008
This article measures the returns from residential, commercial, and farm real estate in the US over the period from 1978 to 2008. Both physical and financial real estate are included. The returns are contrasted with comparable stock, bond, and commodity investments, and with inflation. Recessions an...
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Published in: | Journal of portfolio management 2009-10, Vol.36 (1), p.141-155 |
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Main Authors: | , |
Format: | Article |
Language: | English |
Subjects: | |
Citations: | Items that this one cites Items that cite this one |
Online Access: | Get full text |
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Summary: | This article measures the returns from residential, commercial, and farm real estate in the US over the period from 1978 to 2008. Both physical and financial real estate are included. The returns are contrasted with comparable stock, bond, and commodity investments, and with inflation. Recessions and other episodic events that are peculiar to each asset category are reviewed. The study presented in this article provides some investment guidelines to help asset allocators, investors, and speculators make decisions within this complex maze. The remainder of this study contrasts the time series of holding period returns from comparable investments. High management costs, high information costs, high costs of implementing changes, site-specific risks, and large and inconvenient denominations prevent most physical real estate from being bought and sold frequently. Real estate returns, on average, are less than stock market returns, but real estate is almost always purchased with a mortgage, which levers up the investor's return of equity. |
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ISSN: | 0095-4918 2168-8656 |
DOI: | 10.3905/JPM.2009.36.1.141 |