Buying a Home a Good Investment?

Historically, Homes appreciate at about four or five percent a year. Some years, such as recent years were less, but that is already changing back towards historical norms. Appreciation will also vary from neighborhoods to regional areas.

Although 4 or 5 percent may not seem like that a whole lot, stocks might (off and on) appreciate much more, and you might earn the same return in a safe investment such as treasury bills or bonds.

However, take another look at it this way

If you bought a $200,000 house with a low rate mortgage, with say 20% down money for example, that would be an initial investment of around $40,000.

So at an appreciation rate of say 5% annually, the same $200,000 home would increase in value $10,000 during the first year alone. That would equate to around $10,000 with an initial investment of $40,000. Looking at it as a return, it equals around 25%, much better than stocks or government bonds.

Some will say but I am also making mortgage payments and paying property taxes. Nevertheless since interest on your mortgage and your property taxes are currently both tax deductible, the government is effectively supporting your home purchase.

As you see, your rate of return on a home purchase is higher than most any other investments out there.  This is certainly some food for thought when considering an investment and the greater benefits of homeowner, family stability, and a place to call your own – home.

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