I found this article via a Naval tweet.

Sam Ro writes that Robert Shiller says home investment is a fad:

Yale economist Robert Shiller was reluctant to declare that home prices had bottomed. He explained that the  housing market is a speculative one and that there's no telling which way prices would go tomorrow. He also explained that there wasn't much reason to believe that home prices would appreciate back to levels seen during the last cycle.

Regan followed up with a question that got Shiller perked up.

"Then why buy a home?" she asked. "People trap their savings in a home. They're running an opportunity cost of not having that money liquid to earn a better return in the market. Why do it?"

"Absolutely!" Shiller exclaimed. "Housing traditionally is not viewed as a great investment. It takes maintenance, it depreciates, it goes out of style. All of those are problems. And there's technical progress in housing. So, new ones are better."

These were some of the issues Shiller addressed in his classic book, "Irrational Exuberance."

He continued.

"So, why was it considered an investment? That was a fad. That was an idea that took hold in the early 2000's. And I don't expect it to come back. Not with the same force. So people might just decide, "Yeah, I'll diversify my portfolio. I'll live in a rental." That is a very sensible thing for many people to do."

Adam Johnson also noted that this was in line with Shiller's assessment that real U.S. home price appreciation from 1890 to 1990 was just about 0 percent. This is explained by the falling costs of construction and labor.

For people who can't wrap their heads around this, Shiller offers an analogy.

"If you think investing in housing is such a great idea, why not invest in cars?" he asked. "Buy a car, mothball it, and sell it in 20 years. Obviously not a good idea because people won't want our cars. It's the same with our houses. So, they're not really an investment vehicle."

Any homeowner knows that you can't sell a home with 30-year-old roofing, carpet, and kitchen appliances. Sure, the home price might go up, but you have to adjust for years of maintenance and renovations.

Counter to conventional wisdom, but it's pretty sound logic.

I'm still not sure why the government gives a tax benefit to people who take out loans to buy a home.

That produces very peculiar incentives.

Despite that, lenders are at capacity for processing mortgage applications right now:

http://www.businessinsider.com/lenders-capacity-constraints-hit-housing-2013-3

But that's because they've been reluctant to hire after massive layoffs.