I wrote several times that a home is first and foremost shelter not an investment.  It's been purported to be otherwise for many decades and that's part of the problem.

It is not to say that a home cannot make a good investment, but you can do better with a different approach.

Let me start of by pointing out that why you buy a home you should look at the exit strategy and look at the details that will make the home a good purchase.  That means picking good homes in good areas where people like to live and will probably want to live in the future.  These details are important just not if it goes against the lifestyle you really want.

For discussion sake, would you buy your home in Surprise because it is a better investment then where you want to live and work in North Phoenix for instance?  Would you buy a regular Tuscan type home because it may perform better as an investment then a modern contemporary home if modern is what you want.  I can go on and on. 

When most people buy a home it is first and foremost a place to live and it must match those needs and wants and the desired lifestyle.  Why buy something you don't want only because it may provide you with a better return?  If real estate is to be an investment then separate your shelter from an investment and buy a separate property that can be purchased purely for investment with all the inherent characteristics that will allow it to give the best return.

The second point is that there is an expectation of capital growth.  For the most part a property will appreciate at or above inflation over the long term, though there are studies that show homes don't appreciate at the pace of inflation when you take into consideration all cost including upgrades and preventative care. What is important to remember is that the land appreciates more so then the  house. 

The house will deteriorate and decline in value unless it's taken care of it, kept up and remodeled over its life time.  In some cases the house can out live its total usefulness and need to be rebuilt, it's only the land that remains constant. 

The house only grows in value if you put money into, other wise its value declines.  It is difficult to precisely for-see how a neighborhood will develop in 5-10-20 years, not matter how sophisticated the numbers or the information. 

Market timing.  Will you put you life on hold to buy a home because the market says it's not a good investment?  Housing markets fluctuate and sometimes stay flat.  Sometimes its worth waiting a year and it usually not good to buy at or near the peak, but waiting many years is silly.

There are plenty of examples of people who purchased homes in the 1980's and 20 years later sold them for about the same price or a price that has not even kept up with inflation. 

There are owners who sold in 2008-2009 who purchased in 2000 or 2001 and sold for less then purchase price.  At that time they had no idea that would happen.  Is that bad? Maybe.  It's certainly bad if they relied on that appreciation to be an investment. 

Should they hold until the return is better?  Not if their lifestyle dictates a change.  What about they time spent in the home, was it wasted because the home did turn out to be a good investment? 

Yes, when you buy a home take a look at the whole picture the lifestyle, the usability of the home, and its investment potential.  It may appreciate if you buy well but don't count on it. 

There are a lot of benefits to being a home owner.  It's wonderful, but don't think of it as an investment, because it's not.  It is a home, a place to built and experience life, to put down roots, to grow.