_John Philip Mason is a residential appraiser with 20 years experience and covers the Hudson Valley region of New York. He’s a good friend and a true professional who believes that all appraisers need to have a macro-economic perspective in order to be effective. This week, his lecture gets us comfortable in the doghouse in Solid Masonry._ …Jonathan Miller

I’m not sure when it started or who said it first, but it’s been driving me crazy for years. And now that real estate prices appear to be declining, maybe I can finally get some respect for a pet peeve of mine. It’s a concept that’s been thrown at us so many times and from so many directions, people have come to believe it’s true. It’s been spouted by well regarded financial analysts, high ranking government officials, the media, almost every real estate agent on the planet, and even our own parents. It’s even been cited by some pretty smart people. Not that any of the fore-mentioned are dumb (I love you, Mom).

Countless Americans would shout me down and, surely, I am in the minority. But my faith and conviction keep me strong and I know that I am not alone. Although, if the truth be told, I personally don’t know anyone who agrees with me. None the less, this is my post, damn it, and what matters most is I believe.

And here it is: _A house is a home. It is not an investment._

There, I said it. With those few simple words, I can sense the displeasure of the masses (there’s no ego here is there?), feel their passions rising to a boiling point and anticipate the hate mail that is formulating in the minds of all those “non-believers.” (Or perhaps they refer to me as the non-believer.) Before you start throwing darts, please consider the following:

* If a house were an investment, it would earn money for you, not require that you spend lavishly on it. While home prices do trend upwards in the long run, so does the cost of health care, higher education, taxes and the overall cost of living.
* If a house were an investment, it would serve you, not enslave you. Either we spend many weekends painting, raking leaves, etc., or we pay vast sums of money for others to do our work.
* If a house were an investment, people wouldn’t add over-improvements. We all have a neighbor who doesn’t seem to be able to stop themselves.
* If a house were an investment, they would all be “well” maintained. Conversely, we also have neighbors who haven’t done anything since the day they moved in and nothing will be done until the day they move out.
* If a house were an investment, it would never be the biggest on the block. We all accept the fact that the best house on the block is rarely the one that does the best in the market place (in terms of rate of return).
* If a house were an investment, it wouldn’t need to be personalized. It would serve a function and the rate of return would be in direct proportion to its functionality, not personality.

This is not to say that one can’t buy a house and rent it out as an investment. I just think we are kidding ourselves if we continue to think of our primary residence as an investment. So while I enjoy our home, despite any work it needs, it is simply that, our home. We can’t eat it. It doesn’t work for us. It is simply our little piece of the world.

And at the end of the day, no matter what kind of a day it was, we can go home. Because a house is a home, it is not an investment.


  1. David September 20, 2006 at 12:32 am

    Your owned primary residence earns money for you indirectly in the form of imputed rent, the saved opportunity cost of renting an equivalent home. If you’ve paid a fair price for your house this savings can be significant. How is this different from, say, a company that invests in a co-generator to lower its future cost of electricity? This is fundamental and your points of consideration are mostly irrelevant.

  2. DAVE S September 20, 2006 at 8:58 am


  3. glarph September 20, 2006 at 10:51 am

    I have a four family building. It is my home and an investment. I have timed my mortgage to be finished at my projected retirement age, at which point, my rentals will be my income. I neither need nor depend on price appreciation. I don’t suspect I am unusual in this, but perhaps so.

  4. John Philip Mason September 20, 2006 at 11:15 am

    To David:

    Yes, I agree with you that there are good reasons for owning a home (vs. renting), and I personally believe home ownership is good for most market participants. But, I also believe “investment” is the wrong word to use. The financial benefits of owning a home come primarily from tax breaks and the fact that the cost of ownership is reduced slightly over time, as mortgages are paid down in future (less valuable) dollars.

    However, there are also benefits that pertain to personal choices. To demonstrate my point further; if you live in an area of high priced homes and decide to sell and move to an area of cheaper homes, there is a trade off. That is not my opinion that is the opinion of the market. The reason home prices are so high in areas like New York, California, etc., has to do with demand. This remains true even after you account for higher wages, as residents in higher priced areas dedicate a higher percentage of their incomes to housing costs, federal income taxes (as they end up in higher tax brackets), etc. The market participants have determined that some areas are far more desirable (regardless of your personal opinion or mine) and this is demonstrated by higher prices. So they pay more because they perceive they are getting more (or vice-versa).

    The sad truth is too many Americans are feeling well off because of the value of their home (by calling it an investment), while they save little or nothing for retirement, college, etc.

    To Dave S:

    That’s a good point and it explains what more and more “experienced” developers have been complaining about for the past few years. They have grown more concerned that the “numbers” made less sense with each passing year and calculations relied too heavily on anticipated (double digit) appreciation.

    Peace – John

  5. John Philip Mason September 20, 2006 at 11:18 am

    To glarph:

    You are very wise and you are my hero.

    Peace – John

  6. David September 20, 2006 at 11:36 am

    Dave S, the “house is a home” argument sounds more like a rationalization for overpaying to me. Not every good investment comes with price appreciation, e.g. bonds. If the author had limited his argument to, “don’t depend on price appreciation,” it would have been a stronger case. This oversimplification of the term “investment” is misleading and wrong.

  7. JP September 20, 2006 at 12:14 pm

    I share your beliefs that investments, mark-up, and RoR’s ideals need to be separated from a healthy living space.

    You most certainly can find a linkage between the afore mentioned, health and wellness you get from your home, but I am not sure how accurate that would be. I also don’t know that you would want to.

    You bought your house on initial curb appeal, thoughts of Halloween parties, and feasibility to sell someday had you needed to.

    When I watch my family play in the yard, it makes me feel good about my personal situation. In those moments, there is no thought about my home reeling in the dough for me in 2-3 years when I plan to sell, or the $1000 dollar new refrigerator I need to buy. There are too many emotions for this to be such a large investment in which largely is a display of my personality. My home is nicer than yours; does that make me a better investor? It might make me some money one day, but the trillions I shed to interest, close the profit gap pretty quick.

    For those worried about financial metrics around your home, I offer this to you: make sure to buy your house on sale to aid in buffering the uncertain real estate world in which we live.

    I also believe that those who dream of interest rates, second mortgages, and numbers are in a house to flip, but not a home and those people tend to be the neighbors who would never fix up their house because it might not give them the right return.

    If you have to have numbers around your home, I hope you rent, so you can leave the fastidious feelings home ownership offers to the rest of us who may appreciate it. Renters never have good parties anyway.

  8. John Philip Mason September 20, 2006 at 3:40 pm

    To JP:

    Your appreciation for what you have and what it does for you, makes you more wealthy (in your heart and soul) than the average man. To paraphrase a popular commercial, I think we could say your home is “priceless.”

    Peace – John

  9. jogger September 20, 2006 at 6:49 pm

    glarph, what happens if your taxes skyrocket while you’re waiting for retirement?

  10. David September 21, 2006 at 1:55 am


    I appreciate your sentiments, but that’s what they are; sentiments, not arguments. You keep redefining the word investment so that it fits your assertion. Yes, owning a home brings many intangible benefits, and many real costs. Yes, we can get emotional about it more easily than we do about a mutual fund. Yes, the responsibility for preserving its value falls directly on us instead of on a board of directors. None of this negates the fact that a the decision to buy a house is an investment decision.

    The value of your home is the net present value of the future rent payments you don’t have to make, plus the intangible personal premium you attach, representing your preference for owning over renting. Tax breaks alter the calculation but not the concept. Notice that price appreciation is not assumed.

    If we throw this concept away, John, what is your suggested alternative? I don’t understand how replacing a dispassionate analysis of a major purchase with misty-eyed sentimentality or willful ignorance will serve us better.

  11. John Philip Mason September 21, 2006 at 7:00 am

    To David:

    I understand and respect your opinion and you make some interesting points. What I love about life is the fact that we all have different viewpoints and (some of us) have the opportunity to share them with each other. We don’t have to agree, but that’s okay too. How boring life would be if we all thought and lived the same way. Thanks for all your input.

    Peace John

  12. teresa boardman September 21, 2006 at 1:04 pm

    Great post! So true, what happened? Why do people think they can own a property for a couple of years and then turn around and sell it because they want something different. I have to remind people that it costs money to buy and sell property.

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