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Yet Another View on Why a Home Is One's Castle

Fuad Hasanov and Douglas C. Dacy

Real Estate Economics, 2009, vol. 37, issue 1, 23-41

Abstract: We compute equity‐based real after‐tax rates of return for homeowners and landlords in the United States for 1952–2005. The study confirms that a combined aggregate for residential housing provides a high average net return and low volatility, has low correlation with financial assets and can provide hedge against inflation. The efficient frontier analysis shows that the optimal portfolio for a household with a coefficient of relative risk aversion of four to five is one which contains a bit larger amount of housing than stocks, close to what one observes in the real world.

Date: 2009
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Handle: RePEc:bla:reesec:v:37:y:2009:i:1:p:23-41