Article · Housing
Is real estate a good investment?
After inflation, US house prices are 2.16 times what they were in 1890 — 0.6% a year by Robert Shiller's index. Most of it came after 1996: for 107 years prices stayed inside a band, then climbed 91%. Stocks with dividends did 6.7% a year after inflation over the same years. The catch for the comparison: a home also pays its owner in rent not paid, which no price index shows.
a year: $100 of house in 1890 is $216 today in the same dollars
a year: 107 years inside a band of 65.6–130.3 (1890 = 100)
a year: the index rose 91% after the long flat stretch
the buildings would cost $29.7T to put up again; the land under them is the other $20.1T. Low: 14% in 1952 Q3
home prices against rents; the high was +35% in May 2022, the low −18% in Feb 1997
A hundred flat years
Take inflation out and US home prices did something odd for a century: almost nothing. Robert Shiller's index, which follows the price of the same kind of house, spent 107 years — 1890 to 1996 — between 65.6 and 130.3, with 1890 = 100. The low came in 1921, the high in 1989, and in 1996 the index stood at 113.0: 0.12% a year above inflation over a century. A house kept its value; it did not grow it.
Then it broke out. From 1996 the index rose 91% after inflation, 2.2% a year; from 2001 on, every year has stayed above the old century's high, even through the bust that followed 2006. Now it is at 216.1; its high was 224.4 in May 2022, and it stands 3.7% below that. In 42 of the 137 years since 1890, the index was below its 1890 level after inflation.
A price index of the same kind of house: it leaves out rent, upkeep, property tax and insurance, and it joins four sources over the years (listed under the method below). After inflation means divided by the consumer price index.
Land, not bricks
A house is two things: a building, which wears out and is worth about what it would cost to build again, and the land under it, which does not wear out and is priced by where it is. The Federal Reserve's national accounts value both for every owner-occupied home in the country: the market value of the homes, and what it would cost to put their buildings up again. The difference is the land. In 2026 Q2 owners' homes were worth $49.8T: $29.7T of buildings and $20.1T of land. Land is 40% of the value now, up from 14% in 1952 Q3; its high was 48% in 2005 Q4.
Since the climb began (1996 Q4), the value of owners' homes rose by $31.2T after inflation, and $13.7T of that (44%) was land — though land was only 35% of the value at the start. The buildings' part grows with every house built; the swings belong to the land. From 2005 Q4 to 2012 Q1 the land under US homes lost 60% of its value after inflation, while the buildings changed −10%.
Land and buildings, every tenth year
| Quarter | Homes | Buildings | Land | Land share |
|---|---|---|---|---|
| 1952 Q1 | $273B | $235B | $38.2B | 14% |
| 1960 Q4 | $487B | $374B | $112B | 23% |
| 1970 Q4 | $874B | $662B | $212B | 24% |
| 1980 Q4 | $2.94T | $2.34T | $605B | 21% |
| 1990 Q4 | $7.13T | $4.18T | $2.95T | 41% |
| 2000 Q4 | $12.8T | $7.6T | $5.24T | 41% |
| 2010 Q4 | $18.8T | $12.5T | $6.31T | 34% |
| 2020 Q4 | $32.3T | $20T | $12.2T | 38% |
| 2026 Q2 | $49.8T | $29.7T | $20.1T | 40% |
Before inflation. market: owner-occupied real estate including vacant land and mobile homes at market value; structures: the current (replacement) cost of households' residential structures. Their difference is the value of the land (with the vacant land households own). Not seasonally adjusted; the Board revises past quarters with each release.
Farmland since 1910
Farmland is land at its plainest: priced by what it grows and by what buyers expect it to earn. The USDA's Economic Research Service has valued all US farm real estate — land and farm buildings, without the farmers' own houses — every December since 1910. It went from $31.8B to $3.6T in 2025: 4.2% a year, or 1.0% a year after inflation (3.2 times in today's dollars). Homes did 0.7% a year after inflation over the same years by Shiller's index.
It is not a smooth ride. Farm real estate lost 53% of its value from 1919 to 1932, as the farm bust of the 1920s ran into the Depression, and 31% from 1981 to 1986 in the farm crisis of the 1980s. After inflation the falls were −42% (1911–1932) and −51% (1979–1992). In today's dollars, farmland got back to its 1979 value only in 2013.
| Fall | After inflation | Before inflation | Back at the high, after inflation |
|---|---|---|---|
| The 1920s farm bust and the Depression1911–1932 | −42% | −53% | 1957 |
| The 1980s farm crisis1979–1992 | −51% | −31% | 2013 |
This is the value of all farm real estate, not a price per acre: land in farms grew until the 1950s and has shrunk since. It counts no rent, crops or costs. ERS's forecast for the end of 2026 is left out.
$10,000 in a house, stocks, bonds or gold
Put $10,000 into each at the start of a window and leave it alone: houses at Shiller's price index, the S&P 500 with dividends reinvested, 10-year Treasury bonds with coupons reinvested, and gold. Over the last 10, 20, 30 and 50 years to Jul 2026, and since 1890, stocks came out ahead in all 5 windows after inflation.
Since 1890, $10,000 in houses became $21,615 in 1890's dollars (0.6% a year); in stocks, $73.9M (6.7% a year); in bonds, $92,721 (1.6%). Houses beat bonds in 3 of the 5 windows; against gold, which has a price from 1960, they came out behind in all 4 windows. The 20-year window starts in Jul 2006, the very month of the housing boom's top: where a window starts decides a lot.
| Window | Homes | S&P 500 | Bonds | Gold |
|---|---|---|---|---|
| 10 yearsJul 2016 – Jul 2026 | $18,430+6.3% a year | $40,966+15.1% a year | $10,085+0.1% a year | $30,471+11.8% a year |
| 20 yearsJul 2006 – Jul 2026 | $18,272+3.1% a year | $86,092+11.4% a year | $18,196+3.0% a year | $64,272+9.7% a year |
| 30 yearsJul 1996 – Jul 2026 | $40,436+4.8% a year | $196,903+10.4% a year | $34,348+4.2% a year | $106,214+8.2% a year |
| 50 yearsJul 1976 – Jul 2026 | $121,496+5.1% a year | $2.64M+11.8% a year | $218,016+6.4% a year | $345,961+7.3% a year |
| Since 1890Jan 1890 – Jul 2026 | $948,220+3.4% a year | $3.24B+9.7% a year | $4.07M+4.5% a year | — |
What the price leaves out
The house line above is a price, and a narrow one. Owning a home differs from it in six ways: one adds to the return, two take from it, and three change how much the line says about any one owner.
Prices against rents
A home can be bought or rented. Divide the price index by the rent index and you get a price-to-rent gauge: the higher it is, the more years of rent a purchase costs compared with other times. Month by month since Jan 1987, with 100 = the average of those 475 months, it reads 121 in Jul 2026: prices are 21% above their average against rents, and 82 of the 475 months were higher. The highest month was May 2022 (135), the lowest Feb 1997 (82).
Since Jan 1987, home prices rose 5.3 times and rents 3.7 times. The gauge shows how prices moved against rents, not a rental yield (both are indexes), and it says nothing about what comes next: it stayed high or low for years at a time. It starts in 1987, the first year of the Case-Shiller national index; the rent index of earlier decades is known to understate rent growth, so a longer comparison would mislead.
Price-to-rent, every year
| Year | Price-to-rent | Against the average |
|---|---|---|
| 2026so far | 120 | +20% |
| 2025 | 122 | +22% |
| 2024 | 123 | +23% |
| 2023 | 123 | +23% |
| 2022 | 130 | +30% |
| 2021 | 120 | +20% |
| 2020 | 105 | +5% |
| 2019 | 102 | +2% |
| 2018 | 102 | +2% |
| 2017 | 100 | 0% |
| 2016 | 98 | −2% |
| 2015 | 97 | −3% |
| 2014 | 96 | −4% |
| 2013 | 93 | −7% |
| 2012 | 87 | −13% |
| 2011 | 89 | −11% |
| 2010 | 94 | −6% |
| 2009 | 96 | −4% |
| 2008 | 109 | +9% |
| 2007 | 124 | +24% |
| 2006 | 131 | +31% |
| 2005 | 127 | +27% |
| 2004 | 115 | +15% |
| 2003 | 105 | +5% |
| 2002 | 99 | −1% |
| 2001 | 95 | −5% |
| 2000 | 92 | −8% |
| 1999 | 88 | −12% |
| 1998 | 84 | −16% |
| 1997 | 83 | −17% |
| 1996 | 82 | −18% |
| 1995 | 83 | −17% |
| 1994 | 83 | −17% |
| 1993 | 83 | −17% |
| 1992 | 84 | −16% |
| 1991 | 85 | −15% |
| 1990 | 90 | −10% |
| 1989 | 92 | −8% |
| 1988 | 90 | −10% |
| 1987 | 87 | −13% |
Questions people ask
Is real estate a good investment?
As a price, US housing has been a slow one: 0.6% a year after inflation since 1890 by Shiller's index, against 6.7% for stocks with dividends reinvested and 1.6% for 10-year Treasury bonds. But a home also gives its owner a place to live — the rent not paid — which the index leaves out, and costs upkeep, tax and insurance, which it also leaves out. A mortgage makes both the gains and the losses on the owner's own money larger. Whether it adds up depends on the place, the price paid and the loan; this is history, not advice.
Do house prices always go up?
No. In 28 of the 136 years since 1890 the yearly index fell even before inflation; the deepest fall in the record was −30.5%, from 1925 to 1933; prices were back at the old high in 1944. After inflation prices fell in 66 of 136 years, and the index lost 47.1% from 1894 to 1921; it was not back at its 1894 level until May 1987.
Real estate vs stocks: which is better historically?
By price alone, stocks came out ahead in all 5 windows after inflation. $10,000 put into the S&P 500 in 1890 is $73.9M today in 1890's dollars, against $21,615 in houses. The comparison flatters stocks, though: their return counts every dividend, while the house index counts no rent. A landlord's rent, or an owner's rent saved, minus upkeep and tax, is the missing part of the house's return.
Is land a good investment?
Land is where the swings are. Under US homes, land went from 14% of the value in 1952 Q3 to 40% now, and from 2005 Q4 to 2012 Q1 it lost 60% of its value after inflation while the buildings changed −10%. Farmland returned 1.0% a year after inflation from 1910 to 2025, before any rent or crops, and went through falls like −51% after inflation in the 1980s. Land on its own earns nothing until it is used or rented out.
Are house prices overvalued now?
Against rents, prices are 21% above their average since 1987 (price-to-rent 121 in Jul 2026; 82 of the 475 months were higher). After inflation the index is at 216.1 (1890 = 100); its high was 224.4 in May 2022, and it stands 3.7% below that. Neither number says what comes next: the gauge stayed high or low for years at a time, and mortgage rates, incomes and local supply matter as much. What a house costs in years of income is in the affordability article.
Go deeper
How the numbers are calculated
- Home prices: Robert J. Shiller, "US Home Prices 1890-Present" (shillerdata.com), data of Figure 3.1 in Irrational Exuberance (3rd ed., 2015), as updated by the author; consumer prices and the S&P Composite with dividends from Shiller's online data; 10-year Treasury bonds with coupons reinvested from Shiller's long rate.
- The home price index: Prices of existing single-family homes in the US, a chain of sources joined by Shiller: 1890 to 1933: Grebler, Blank and Winnick (Capital Formation in Residential Real Estate, 1956) ("Grebler"); 1934 to 1952: median home prices in five US cities, compiled by Shiller ("Five-CityMedian"); 1953-01 to 1974-12: the home purchase component of the US consumer price index (BLS) ("PHCPI"); 1975-01 to 2026-07: the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index (its copy on FRED, CSUSHPINSA, starts in 1987) ("S&P/CoreLogic/Case-Shiller"). Annual to 1952: one figure per year, which Shiller dates at the start of the year and deflates with January's CPI; monthly from January 1953. The latest years are the S&P CoreLogic Case-Shiller national index, not seasonally adjusted; S&P revises its latest months, and Shiller updates the file monthly. A price index of the same kind of house over time: not rents, maintenance, property taxes or insurance, and not the return of owning a home. Shiller's real index (column B) is this column over his CPI (the CPI of ie_data.xls, January before 1953), 1890 = 100; the fetch checks both.
- Land and buildings: Board of Governors of the Federal Reserve System, Financial Accounts of the United States (Z.1), table S1M.b: households' owner-occupied real estate at market value (LM155035015) and households' residential structures at current cost (LM155012665); land = the first minus the second. market: owner-occupied real estate including vacant land and mobile homes at market value; structures: the current (replacement) cost of households' residential structures. Their difference is the value of the land (with the vacant land households own). Not seasonally adjusted; the Board revises past quarters with each release.
- Farm real estate: USDA, Economic Research Service, Farm Income and Wealth Statistics (release of 2026-09-03), "Dec. 31 value of real estate assets, excl. operator dwellings", United States. The farm sector balance sheet: land and farm buildings at market value on December 31, excluding the farm operators' dwellings; all US farms, not a price per acre (ERS's file has no acreage). Years from 2026 are ERS forecasts in this release (column forecast = 1). Some early years repeat the same figure (e.g. 1913-1914, 1925-1928): ERS's historical estimates. Nominal dollars.
- Rent: U.S. Bureau of Labor Statistics, CPI rent of primary residence (CUSR0000SEHA), retrieved from FRED, Federal Reserve Bank of St. Louis. Seasonally adjusted. Months without a published value are left out (2025-10).
- Gold: World Bank Commodity Price Data (The Pink Sheet), CC BY 4.0; monthly averages from 1960.
- After inflation: each value times the CPI of Oct 2026 over the CPI of its own month (January for the yearly home prices to 1952, December for farm real estate, the quarter's last month for the Fed's figures). $10,000 after inflation is in dollars of the window's first month.
- The breakout year is the first year from which every later year stays above the highest year before it (2001); the climb starts at the lowest of the 6 years before it (1996); the band spans the lowest and highest yearly figure from 1890 to 1996. Yearly figures: Shiller's annual ones to 1952, the average of the months from 1953 (the latest year: the months so far).
- Falls: from a high to the lowest point before the next high, on the yearly figures for houses and farms (a fall counts from 20% for farms) and on quarters for land.
- Price-to-rent: Shiller's home price index over the rent CPI, month by month from Jan 1987 (a month without a rent figure takes the middle of its neighbours), divided by the average of all those months and times 100.
- Shiller's file also has a building cost index (the Engineering News-Record index); its owner grants reuse only on request, so the Fed's current cost of the buildings is used for what a house's building is worth.
- Shiller's notes on the latest months: Oct price is Oct 2nd close; Sept/Oct CPI estimated; Oct GS10 is Oct 2nd value.
- This is history, not investment advice.
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