Everywhere I look, everyone I talk to, the focus eventually turns to the topic of real estate, and, ultimately, how great of an "investment" real estate is.

First, I'd like to point out that your primary home is not an "investment" in the purest sense of the word. An investment is "a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price."

Your residence doesn't fit the definition. Even if you buy it with the intention to sell it later after it has risen in price, you have to live somewhere. When you sell your primary residence, you then need to buy another one.

The only circumstance when your primary residence could count as an investment is if you have bought it for the price appreciation, and plan to sell it in the midst of a real estate boom (like now), but then plan to rent for several years as the inflated house prices come back down to reality.

In that instance, yes, you could consider your home as an investment.

But most homeowners do not want to go back to renting. And the vast majority of homeowners do not believe that housing prices will ever go down.

They are going to be in for a major shock within 2 years. Today's real estate boom was built on easy financing deliberately put into place by the Fed.

It doesn't take a Ph.D. to understand that this lending climate is a disaster in the making. Mortgage lenders are making "ninja" loans (No-Income, No-Job, no-Assets) by the billions, Wall Street is "securitizing" them, and pimping those packages around the world as AAA investments.

Nothing could be further from the truth.

Nobody seems to care that millions of these people are being given loans that are mathematically impossible for them to pay back considering their financial condition.

Banks don't care because they aren't holding the loans.

Wall street doesn't care because they are earning billions in fees.

Sadly, even the investors don't care because they've been told that these bundles of mortgages have been transformed into AAA-rated investments through Wall Street's clever inclusion of derivatives to "spread the risk."

That's simply not true, and I predict we will find out how ridiculous this entire housing boom has been within a couple of years.

You simply cannot take millions of people who are not able to afford a home, loan them money they will not be able to pay back, send them into the housing market to artificially bid up prices, and expect long term, national prosperity to be the result.

That's a recipe for long term disaster. You'd be wise to not get caught up in today's real estate hysteria.