Short-term terrible housing news is no surprise right now, but the long-term thesis that residential real estate is a good investment is starting to crumble too.

Recent research from Wenli Li and Fang Yang (via Harvard Business Review) shows that the real rate of return on housing from 1975-2009 was actually negative.

From Li and Yang:

Assuming an annual depreciation rate of 2.5 percent, a property tax rate of 1.5 percent, a mortgage interest rate of 7 percent, and a marginal income tax rate of 25 percent for a typical taxpayer, the adjusted real rate of return on housing actually falls below zero (1.3-2.5-1.5+0.25(7+1.5))=-0.575 percent! Remember that 1.3 percent is the real rate of return of the national house-price index between 1975 and 2009. Meantime, under the 25 percent marginal income tax rate for a typical taxpayer, the rate of return on stocks during the same period falls only to 4.5*(1-0.25)=3.375 percent.

The report also details several other dangers in the current own-housing thesis:

Reduces mobility , making the labor market less efficient (in fact, British economist Andrew Oswald argues the higher the homeownership rate, the higher the structural unemployment rate)

, making the labor market less efficient (in fact, British economist Andrew Oswald argues the higher the homeownership rate, the higher the structural unemployment rate) Government support measures encourage house flipping by investors

by investors Rising prices increase homeownership consumption in a disproportionate manner

in a disproportionate manner Homeowners tap equity, rather than holding onto it as wealth

This not a big surprise. It's actually similar to the point that the long-term expected returns on commodities is 0%, as has been pointed out by SocGen's Dylan Grice.

In the end, what makes money is human ingenuity -- building new things and creating value. Things like rocks, or a constructed house that's wasting away every year in need of repairs is not where the money is.

Don't miss: Why Gary Shilling thinks home prices will fall another 20% >