A Brief Message
Why Buying NOW is a Good Idea
The Best Investment
As a fairly general rule, homes appreciate about four or five percent a year. Some years will be more, some less. The figure will vary from neighborhood to neighborhood, and region to region.
Five percent may not seem like that much at first. Stocks (at times) appreciate much more, and you could easily earn over the same return with a very safe investment in treasury bills or bonds.
But take a second look…
Housing costs have come down because people got greedy, didn't anticipate a slowdown of purchasing, and now are trying to bail out by selling. Prices continue to drop as repos by banks are flooding the market. As with past decades of this type of cycle, it will reverse and those who buy low now, will sell high in the years to come.Presumably, if you buy a $200,000 house in today's depressed market, you do not pay cash for the home. You get a mortgage, too. Suppose you put as much as twenty percent down – that would be an investment of $40,000.
At an appreciation rate of 5% annually, a $200,000 home would increase in value $10,000 during the first year. That means you earned $10,000 with an investment of $40,000. Your annual "return on investment" would be a whopping twenty-five percent.
Of course, you are making mortgage payments and paying property taxes, along with a couple of other costs. However, since the interest on your mortgage and your property taxes are both tax deductible, the government is essentially subsidizing your home purchase.Your rate of return when buying a home is higher than most any other investment you could make. These opportunities occur about every 20 years. the last major opportunity was when the housing market took a downward turn in the late 1980s. Within 10 years many of those homes that couldn't be sold were selling for twice their original asking price.
