Some people say “You can’t lose with real estate” and other say “There a real estate bubble ready to burst” – Who is right?

In the end, what you get out of your house rarely matches what you get from your retirement plans.

Often in a divorce, one person wants to retain the home, either for sentimental reasons, as a consistent living space for children, or because they believe that the home offers the greatest appreciation. That last assumption may not be correct, and there are other issues that a divorcing couple should consider in dividing assets.

To put the issue one way, before you decide that you want to keep the house in a divorce and give up retirement plan accounts, ask your self if you plan to sell a bed room when a child needs money for college tuition or when you need money at age 65. Holding the bulk of your assets in your home means you have your net worth primarily in one location, which is not diversified, and that asset may not offer the best investment returns.

Psychologically, people assume that the homes have been appreciating so they will continue to appreciate. However, you do not get hourly quotes on Bloomberg for the value of your home. In fact, house prices have fluctuated over time. For example, if you purchased a house in the late 1980s, the value went down and did not return to what you paid until the early 1990s.

If you compare the price change over a 10-year period of property, even excluding all the costs to operate, maintain, and improve the property, real estate does not usually match the returns of the S&P 500, which has no carrying and maintenance costs.

True, the returns on real estate are better when you look at how much your equity increased. For example, a house purchased in 1992 for $350,000 might be worth $700,000 today. If you put 20% down, $70,000 in cash, the equity today of more than $350,000 (depending on how much of the mortgage was paid off) is a 5-fold return. However, when you account for the costs of the after-tax mortgage and the property taxes, the cost of repairs, maintenance and any improvements, the return may come down. Thirteen years of mortgage payments and property taxes alone could be over $180,000, assuming a 30% tax rate, maintenance could be another $20,000 or more and, to maintain the value of the house, as much as $100,000 of improvements may have been mandated. Now the cost is $370,000, including original down payment, and the current value of the equity is $350,000. This return is actually negative, while the stock market, represented by the S&P500, produced a 4-fold return. If your property paid you rent to cover the carrying costs, it would behave more like an investment. However, because you live in it, and pay the costs for that comfort, a house is really a “lifestyle” asset rather than an investment.