What Happens When the Boom Goes Bust?

According to the National Association of Home Builders, the average price for a new home in 1980 was $76,400. By 2005, it had climbed to $295,100.

That's incredible! $218,700 in caaash ...
Before you get too excited thinking about investing in real estate and flipping houses, ponder this: Over a 25-year period, that $218,700 gain comes out to a 5.6% annualized return.

Think about that. If your stock investments had grown at just 5.6% annually over the past 25 years, you'd be kicking yourself. And with good reason -- during that time, the S&P 500 earned 10.3% annually -- almost double the average gains in housing. Ford (NYSE: F) (12.3%) would have more than doubled the average house's return, while McDonald's (NYSE: MCD) (16.2%) would have nearly tripled it, and Wal-Mart (NYSE: WMT) (27.3%) would have more than quadrupled it. Even AMR (NYSE: AMR), which operates in the cutthroat and sometimes struggling airline industry, churned out a 10.1% annualized gain from 1980 to 2005.