Over at The Consumerist, there’s a post titled WSJ Asks, “Is Your Home A Good Investment?”:

Brett Arends at The Wall Street Journal has compared Case-Shiller house price data to annual inflation rates, and speculates that owning a home may not be a very good investment. “You can often do better on long-term inflation protected government bonds,” he writes.

In the opposite corner, we have the MarketWatch commentary Stupid Investment of the Week:

[I]t’s hard to believe anyone would settle for getting their money back with no possibility of earning a cent for the foreseeable future.

Yet that is precisely the case with the I-bond, the inflation-protected version of the U.S. Savings Bond. While all I-bonds currently earn a zero return — 0%, literally — new-issue bonds also actually guarantee that they will never significantly beat inflation, meaning they can’t do the job they are intended for. That makes the I-bond the Stupid Investment of the Week.

Normally I would just put these two next to each other and enjoy the comedic value (even though it isn’t a perfect apples to apples situation). This is a somewhat serious topic, though, and it is worth examining a little—very little, I promise. First, it is important to defend the WSJ article as saying that you can “often” do better on “long-term” inflation protected bonds. There are a few things to consider. While the I-bonds are returning zero in real terms, they may very easily outperform housing in the short term. When rates are higher, a mortgage can be rather expensive, and I-bonds earn a better return. It just happens that this isn’t the case right now.

Whether or not a house is a good investment rests on a number of things. A house is usually a leveraged purchase, and there is much more leverage allowed for a home than an average person could get investing in bonds (this is good if expecting a positive return). Mortgage rates are quite low right now. A house can be lived in while it is being paid for, either by the owner, or by a renter. If the owner lives in the house, there’s a quantifiable benefit of not having to pay rent. If a renter lives in the house, the rental income subsidizes the cost of the purchase. The average person is not going to be able to loan out their bonds for a reasonable return from a short seller.