They Just Don’t Get It: Is the Mainstream Media Biased Against Real Estate As An Investment?


How many people do you know that made their fortunes in the stock market, and can live off the income their stocks and bonds generate? I don’t know any, but I do know quite a few successful real estate investors who have managed to quit the rat race, and can live off of their real estate portfolios. As a real estate investor, this is something that we all can intuitively grasp. It is not that complicated – a good income property is like a machine for printing money. Stocks, unfortunately, seem a lot more like putting money down at a casino in the best of times. In the worst-case scenario, they resemble nothing more than a crooked Ponzi scheme where the early investors make out like a bandit, and the last sucker in gets burned. Enron, WorldCom, Madoff, need I go on?

Despite our intuition, for reasons that continue to escape me, the media seems to portray stock investing in a different, and altogether more positive light than real estate investing. Here are a couple of recent examples. Compare these two headlines:

10 years…no gain in home prices” (CNN)

Will stocks’ ‘Lost Decade’ usher in another bull market?” (USA Today)

Notwithstanding the rosy outlook of the stock market article, if you go back and compare the actual returns on stocks versus real estate over the past decade, as discussed in the two articles, you’d see that real estate handily outperformed the stock market, even without taking into account the inflation-beating leverage and tax advantages that are unique to real estate.

For instance, the Money/CNN article leads off with the words “Taking into account inflation, home prices are actually lower than they were 10 years ago . . ..” Drill down a bit, and you’ll see that the author is only saying that there was “no gain in home prices” in inflation-adjusted dollars. There was, in fact, a gain of 25% in nominal dollars in home prices over the decade. In contrast, the stock market article in USA Today nowhere accounts for the effects of inflation, and suggests that the market is ready for a comeback. In fact, if you read the article, you’ll see that the S&P 500 was down by almost 25% during the decade.

Let’s recap if you will: real estate was up 25%, and stocks were down almost 25% over the decade. Even without factoring leverage and tax advantages into the equation, anyone can see that real estate was a far superior investment. But, the net effect of articles like these is to leave the average reader thinking that real estate must be a lousy investment, while the stock market is now primed for “another bull market.” A more careful reader may conclude that such a conclusion is a lot of “bull.”

What do you think?

Photo: sachab

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  1. This article came up in two conversations I had today, Flo. It really is amazing how little respect real estate investors get thanks to a handful of bad eggs. Thank you for saying what many of us think about on a regular basis. I believe that real estate investors need to be more outspoken about these kinds of issues so they can arise to the forefront of people’s minds.

  2. Florence,

    I think that you bring up an interesting point here.

    It is my observation that the media generally puts a negative spin on real estate investors.
    Why, you may ask?
    I think this is because the media’s target market (the general population), are afraid of and don’t understand real estate investment. I mean no disrespect, here but we all know that this is the reality.

    A confused mind is fearful, and when the general public is confused about real estate investment, they will naturally become fearful of it as an option to invest in.

    The media adds fuel to the fire by further portraying real estate investors as opportunistic, heavily funded, greedy people. When the media presents this image to the public, it further emphasizes with the public that real estate investors are for lack of good works usage, mean.

    I trust that my rant made sense. (last comment of the night for me!)

    .-= Neil Uttamsingh´s last blog ..2 Tips To Help You Become a Winner =-.

  3. James Blakeley on

    Still my income can be increased while others chase the other markets. Invest where you want, because your money should be exhausted from earning, by the time it makes it into my real estate retirement.

  4. I dedicated a 38 page chapter on stocks vs. real estate in the areas of performance, leverage, taxes, transparency, effort, volatility and diversification.

    It is not that the big media players don’t get it. The truth is that they don’t make much money from real estate investors. They make more money from Wall Street so it is in their best interest to promote Wall Street instead of real estate.

    I don’t care. The more they pound real estate the more money I make. The real estate prices may be flat or down compared to 10 years ago but the rents are up. 🙂

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