The true return on a home investment should not be based simply on home appreciation, but also the amount leveraged. Homebuyers typically use their own money to cover only 10% to 20% of the purchase price of a home. Homeowners also receive tax benefits for their investments, in the form of deductions allowed for mortgage interest and property taxes.

The 1998 "State of the Nation’s Housing" report from Harvard University’s Joint Center for Housing Studies shows a dramatic increase in the rate of return on housing the longer it is held. For instance, the housing survey shows that the typical homeowner who experiences an annual home appreciation rate of five percent and who made a down payment of 10% will generally receive a 94% return after owning the home only three years.

After owning five years, the rate of return increases to 225%; and after 10 years, the rate of return jumps to 623 percent.

If you make a 20% down payment and experience the same amount of home appreciation (5%), the rate of return is lower, but still very respectable: after owing three years, the average rate of return is 46%; after five years, 110%; and after 10 years, 305%.