Home ownership: A good investment

Hi Neighbors,

I've written about this before, but I think it is especially true for the Sacramento region. Now is the time to buy. Historically if you look at home values increasing over time, home prices have kept pace with inflation over the long run. With our current adjustment, the Sacramento - Placer - El Dorado counties are now actually below the long range trend. That indicates to me that not only will this region be among the first to recover, but will some modest appreciation. Of course the big caveat is the overall economy. You have to have jobs in order to have a decent economy.

Another thing to keep in mind from an investment point of view, your home values increase based on the purchase price of the home. So if your home is purchased for $100,000 and it increases 2% your HOME is now worth $102,000. But let's say you bought the home with 30% down. You have actually increased your $30,000 investment by $2,000. That's a 6 2/3% increase in your home equity. If your put down 3.5% FHA your increase based on investment is even greater.

The important thing to remember is that home ownership should make sense for you, and when you factor in all of the benefits and costs involved typically your ahead of the game when you buy a home. Some of those benefits may be intangible - like being able to have your children go to the schools you want them to, being able to have a home that fits your lifestyle, etc.

Here's a great quip from the NAR bulletin on this very topic:

The American dream of homeownership is still a good bet, financial advisors say firmly.

Despite the downturn in the last couple of years, homes have still appreciated an average of 4 percent a year since World War II. Plus, it's a leveraged investment; a 10 percent down payment yields a 1,000 percent return if the price of the home doubles.

There are also valuable intangibles. Owning a home provides independence, security, community, and a roof over the owner's head. No one can say that about investing in stock.

Source: Associated Press, Dave Carpenter (10/12/2009)

Jeff
http://www.EnglePropertiesOnline.com