Real Estate Remains A Strong
Investment
by: W. Troy Swezey
Opportunities to make big, quick profits in
residential real estate tend to come and go in cycles.
When a local market is hot, families may find it
possible to buy a house at an attractive price, fix it
up, and watch its value rise in just a few years.
When the same local market is at the low end of the
appreciation cycle, reaping a profit on the family home
can take a good deal more time but the reward can be
just as satisfying if price and location and carefully
considered.
Even in uncertain economic times like these, history
shows that real estate is one of the soundest
investments a family can make. During the Great
Depression of the 1930s when the stock market plummeted
as much as 89 percent, housing prices dropped only 39
percent. According to most of the research on housing
trends, prices continually stay at the same level as,
and most often appreciate faster than, the rate of
inflation. Housing prices actually rose an average of 10
percent during the recessions of the mid-1970s and
early 1980s.
CENTURY 21 statisticians report that the rate of home
appreciation since 1990 has been around five percent
nationally, with inflation hovering around four percent.
Homeowners, obviously, are still staying ahead in the
real estate game on average.
And, with mortgage interest rates the lowest
theyve been in two decades, real estate today is a
more attractive investment than its been in years.
First-time buyers are the big winners in this
environment. Drawing up a budget can help you and your
family decide on what you can afford. Once youve
determined a price and picked your desired community,
shop around to find the best house you can buy for your
money. This strategy can help you realize greater
appreciation two or three years down the road.
This is also a good time to purchase a second or
vacation home. A bargain cabin in the woods today might
bring an excellent return when housing prices move
upward. Affordable second-home prices also allow you to
purchase a vacation home that can serve as a
stepping-stone to a larger retreat in the future.
But appreciation isnt the only advantage to buying
a home. The federal government thinks home ownership is
so important to the future of our country that it allows
mortgage interest to remain the last substantial tax
shelter for families. Owners can also take deductions on
their property taxes. And, the profit on the sale of
your home remains tax free as long s you buy a house for
a greater or equal price.
So before you decide that this is not a good time to
invest in residential property, re-examine the financial
benefits of owning your own home and put them to work
for you.
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