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Notes -
My claim is less that housing prices have been the Single Best Return On Investment, and more that they're just very consistently rising.
Separately, I don't think the St Louis Fed's residential property price index is really an apples-to-apples comparison to stock investments or what I'm motioning around, but their documentation on what data means exactly is pretty painful. This measure is probably closer, but because it's an average of sale values rather than of all values some of the drop in 2008 is probably about decreasing velocity at the top of the market, and it does hide some of the inflation-related 'real' value drops.
But that measure does not seem to be adjusted for inflation. Per the BLS inflatiin calculator, the 26,000 average in 1970 = 211,000 today, so today's $505,000 is 2.39x the 1970 price. That is about the same (actually somewhat less) than the 2.59x increase in the real price index I linked to (60.9 to 157.9).
I spelled out that the Fed numbers I was providing did not include inflation at the end of the post above. (I'm also not sure, but I'm 99% confident the SP500 isn't adjusted for inflation either. Yes to be clear, stocks are still going to end up having larger absolute growth.)
The exact look of the chart varies a lot depending on what inflation and housing price index you use, and some of them will show drops around the 2008 and 1979 (sometimes 1989), but even those will be less volatile than the stock market, unsurprisingly, and that's what I'm pointing toward.
Which is simultaneously obvious and kinda weird! Housing prices are not obviously goods like an opera or string quartet that should be this subject to the Baumol effect, and while land values (and regulatory overhead) are part of the difference in value, you can at least imagine some counterfactual world where a flood of cheap housing brought the average house price lower even if some individual local markets still skyrocketed as they have in our world.
Oops, when I said "$60 invested in the SP500 would be worth $1,540 today after taxes," I meant after inflation, not after taxes. And with dividends reinvested. See calculator here: https://ofdollarsanddata.com/sp500-calculator/
Edit:
Real income has increased substantially over the years, and as real income increases, people can afford to pay more for important purchases such as housing, both in absolute terms and as a pct of income. So, it is not surprising that housing prices have risen slightly faster than inflation. And, of course, new houses have grown in size over time
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