While many investors are bullish on housing these days, Yale economics professor Robert Shiller, co-founder of the Case-Shiller home price index, is not one of them—at least not for the long term.
With prices moving up, housing “might be an attractive investment” for someone who wants to flip a home, he told “Nightly Business Report.” However, most people are not in that category.
“Most people are thinking buy and hold,” he added. “For the longer run, I don’t think housing is a good investment.”
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On Wednesday, hedge fund manager John Paulson, who made more than a billion dollars betting against the housing industry before it collapsed, talked up housing at the Delivering Alpha conference presented by CNBC and Institutional Investor.
“I still feel buying a home is the best investment any individual can make,” Paulson said. “Affordability is still at an all-time high. It still costs less to own a home after tax than it does to rent.”
Shiller agrees there is momentum in the housing market, and expects prices to rise for a year or so.
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However, he cautions buyers from purchasing a bigger home than they need for investment purposes, or buying a second home, because he doesn’t think it is a good prospect in the long run.
“Historically, housing has not increased above the inflation rate,” Shiller said. “There’s a big misperception that houses are cheap now. They’re not generally cheap. They’re just kind of back to an average level.”
He does, however, believe there is value in owning a home for those looking for a place to live, and the tax advantage. Just don’t expect to make a profit when it comes time to sell down the road.
“The dividend comes in the form of a nice place to sleep [and] a family room,” he said. “Don’t expect capital gain.”
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