As a long-term investment, homeownership is still one of the best investments for individual households.
“Why” you may ask?
After all, the headlines say the housing market is down and out, with
defaults rising at an alarming rate, and mortgage markets so frozen
that buyers can’t get a home loan at any price.
What buyers need to
realize is that housing markets, like all markets, inevitably have
their ups and downs. And homeownership has a track record that is
virtually unmatched by any other purchase in terms of its real benefits.
Despite the turmoil in
mortgage lending, if you have good credit, a job and steady income, you
will find there is still plenty of mortgage credit to be had at good
rates. For well-qualified buyers, rates are running at near historical
lows.
Homeownership’s Real Value
Here are a few examples
of why, dollar for dollar, homeownership is a solid stepping stone to a
future of financial security and the single largest creator of wealth
for many Americans.
Over the long-term real
estate has consistently appreciated, even through periodic adjustments
in local markets in response to economic conditions. On a national
level, home
appreciation has historically increased 5-6 percent annually, report
economists at the National Association of Home Builders.
Five percent may not
seem much at first, but here’s an example that will put it into
perspective: Say you put 10 percent down on a $200,000 house, for an
investment of $20,000. At a 5 percent annual appreciation rate, that
$200,000 home would increase in value $10,000 during the first year.
Earning $10,000 on an investment of $20,000 is an extraordinary 50
percent annual return.
In contrast, putting
that $20,000 down payment into the stock market and getting a 5 percent
gain would only yield a $1,000 profit.
Compared to Stocks
Looking at it another
way, over a longer period of time, if someone put $10,000 into the
stock market in 1996, the average annual S&P return would make that
investment worth $21,500 today—an increase of $11,500. The median home
price in 1996 was $140,000.
Today, that same home would have gained nearly $100,000 in value.
Don’t miss out on the benefits of homeownership.
