Let me quickly make my case. Yes, real estate, by definition, is a real asset. Over time, real assets should appreciate. Therefore, your home should be considered part of your investment portfolio, right? I will first say it “depends”, but almost certainly not.
Example: Let’s say you save for a 20% down payment for a $500,000 home. You put down $100,000, and mortgage the rest with a 30 year fixed at a 4.5% interest rate. Your monthly payment is roughly $2,000, and your monthly taxes are roughly $800. So, now, before you move in and order your first pizza and sit around the card table with aroma candles amidst the moving boxes to be unpacked, it costs you about $2,800 per month to own your home. That equals $33,600 per year. Now, it’s time to consider other costs of ownership expenses, such as utilities, continual maintenance, and perhaps the occasional upgrade or remodel.
This asset, which, again, may likely be the biggest kind of purchase you ever make, is not going to generate any income. You live there. It’s your home. I hope it adds much quality to your life.
Let me quickly address the two ways your homestead could prove a positive investment. You buy your home at a great discount, and, before the cost of ownership catches up, you are forced to move for a job/whatever reason to another location with a much lower cost of living (meaning, you can buy a similar and suitable home for a much lower price with the extra cash in your pocket). The second way to view it as an investment is not for you, but your beneficiaries.
Someone older and wiser than I once told me it’s best to think about your home’s appreciation over time cancelling out your cost of living in your home so that you essentially are living “rent free”.
I like that way of thinking.