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Real Estate Is Best for Living In - Not Investing

Why Berkshire Hathaway Has Quietly Outperformed Homes Everywhere

When most people think of building wealth, real estate usually sits near the top of the list. The reasoning feels intuitive: houses appreciate over time, you build equity as you pay down the mortgage, and home values often rise dramatically in dollar terms. It's comforting to look at Zillow and see your home "worth" more than when you bought it.

But here's the catch: measuring wealth in U.S. dollars is a deceptive yardstick. Dollars themselves lose purchasing power over time, and what looks like growth can be an illusion. The real test is whether your asset outpaces the very best alternatives, the kind of investments that compound wealth at exceptional rates. By that standard, real estate has been one of the weakest performers of the last quarter century.

Berkshire Hathaway vs. Real Estate

Take Berkshire Hathaway as a proxy for elite long term investing. For decades, Berkshire's compounded annual return has dwarfed the average U.S. home's appreciation. Even during the recent housing boom, when prices surged in nominal terms, they still lagged far behind Berkshire stock. Homes have "appreciated" in USD largely because the dollar is being debased. The average house that might be "worth" $500,000 today is really just reflecting inflation, not genuine wealth creation. Measured in Berkshire shares, homes are actually depreciating. A home that cost the equivalent of one share of BRK.A in 1990 now costs only a fraction of a share. The house didn't outperform. It underperformed massively.

Consumption vs. Investment

This is why real estate should be viewed as personal consumption, not a financial investment. A home is a lifestyle choice. It provides shelter, comfort, schools, community, and memories. Those are valuable, but they aren't compounding financial returns. Maintenance and taxes eat away at whatever appreciation you see. Unlike stocks, homes require ongoing cash outflows for upkeep, insurance, and property taxes. Liquidity is limited too. You can't sell a bathroom to pay for retirement; you need to sell or borrow against the entire property. Meanwhile, businesses like Berkshire Hathaway reinvest profits year after year, compounding wealth at rates that housing simply cannot touch.

The Illusion of Rising Home Values

Looking at your home's price chart in dollars feels good, but it creates a false sense of wealth. When benchmarked against assets like Berkshire Hathaway, or even the S&P 500, your home's "appreciation" starts to look more like depreciation.

Owning real estate is still valuable, but its value is in consumption, not investment. It's about living well, not beating the market. If you want long term wealth creation, look to compounding businesses, not drywall and shingles.

Try It Yourself

Don't take my word for it. The calculator below lets you run the numbers on your own home. Enter the month and year you purchased, what you paid, and what you believe the home is worth today. It will show you exactly what that same money would be worth if you had invested it in Berkshire Hathaway (BRK.B) instead, including total return, annualized growth rate, and a side by side chart tracking both investments over time. The results tend to speak for themselves.