The bottom line on investing in tangible assets: rate of return—moderate, especially if you can receive

nonfinancial benefits from, for example, living in the house; risk—moderate for housing or high if you buy gold

or baseball cards; liquidity—low, because it often takes considerable time and energy to sell a house or a piece

of fine art and turn your capital gain into cash. The next Clear It Up feature explains the issues in the recent

U.S. housing market crisis.

CLEAR IT UP

What was all the commotion in the recent U.S. housing market?
The cumulative average annual growth rate in housing prices from 1981 to 2000 was 5.1%. The price of an average

U.S. home then took off from 2003 to 2005, rising more than 10% per year. No serious analyst believed this rate of

growth was sustainable; after all, if housing prices grew at, say, 11% per year over time, the average price of a home

Access for free at openstax.org
17.2 • How Households Supply Financial Capital 423
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