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As we mentioned before, real estate, on average, has out-performed the stock market in the last 18 months, and even over the last 10 years. This is particularly remarkable as the stock market data includes the benefit of reinvested dividends, while the real estate figures account only for market value and not rental income. Real estate is a protected investment in the US as government policy supports home-ownership. This protection shows up in tax benefits to homeowners and in monetary policy that reduces volatility in prices and financing costs. Real estate has a significant edge over equities from the standpoint of risk-adjusted returns (e.g., Sharpe Ratio).
Those investors who owned luxury properties should find consolation in the fact that these properties have held their value better than lower cost, entry-level properties. The chart below is typical of national trends whereby luxury grade properties have held their value better than lower cost segments.
