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When a House Is More Than a Home: Performance of the Household Portfolio

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Abstract

Home equity investment comprises a substantial portion of the household portfolio, consequently, it can be an important source of wealth accumulation. Several studies have suggested that the United States has over-invested in housing relative to capital assets. Much of this research has been based on highly aggregated data and fails to consider the portfolio advantages of residential real estate. This study uses the mean-variance criteria and fifteen-year, before-tax, all equity real estate return series derived from the population of all sales of single-unit residential real estate for Memphis, Tennessee (140,000 transactions). We conclude that for this market, the proportion of the aggregate household portfolio allocated to residential real estate is justified.

Suggested Citation

  • Michael Devaney & William Rayburn, 1988. "When a House Is More Than a Home: Performance of the Household Portfolio," Journal of Real Estate Research, American Real Estate Society, vol. 3(1), pages 75-85.
  • Handle: RePEc:jre:issued:v:3:n:1:1988:p:75-85
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    References listed on IDEAS

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    1. Gau, George W, 1984. "Weak Form Tests of the Efficiency of Real Estate Investment Markets," The Financial Review, Eastern Finance Association, vol. 19(4), pages 301-320, November.
    2. Roger G. Ibbotson & Laurence B. Siegel, 1984. "Real Estate Returns: A Comparison with Other Investments," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(3), pages 219-242.
    3. Fama, Eugene F. & Schwert, G. William, 1977. "Asset returns and inflation," Journal of Financial Economics, Elsevier, vol. 5(2), pages 115-146, November.
    4. Bodie, Zvi, 1976. "Common Stocks as a Hedge against Inflation," Journal of Finance, American Finance Association, vol. 31(2), pages 459-470, May.
    5. Hoag, James W, 1980. " Towards Indices of Real Estate Value and Return," Journal of Finance, American Finance Association, vol. 35(2), pages 569-580, May.
    6. Mike Miles & Tom McCue, 1984. "Commercial Real Estate Returns," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(3), pages 355-377.
    7. Douglas K. Pearce, 1982. "The impact of inflation on stock prices," Economic Review, Federal Reserve Bank of Kansas City, issue Mar, pages 3-18.
    8. David Hartzell & John S. Hekman & Mike E. Miles, 1987. "Real Estate Returns and Inflation," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 15(1), pages 617-637.
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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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