 | Robert Cobb is Managing Broker/Owner of CENTURY 21 Cobb Realty in Pittsburg, KS. He is a life-long resident of Pittsburg and a PSU graduate with a BS in Business Administration. He has been in the real estate field for 23 years. He is currently a KAR Director and the President of the Pittsburg Board of Realtors. |
Real Estate
2011-03-01 10:26:00
Buying a home...still a good investment?
Question: Is buying a home still a good investment?
Answer: Per NAR data since 1968, on an average US home prices have risen 5.5 percent annually and outpaced inflation by about 1 to 2 percent. Even with the downturn in the market, this has continued to be the case and is projected to be the case for the long term. After accounting for the money put in for property taxes, home insurance, security and maintenance, investing in a home doesn’t have the rate of return of a diversified, well-managed portfolio in stocks and bonds, but is still considered a good way to build wealth while actually receiving use of the asset you have invested in.
Long term, also there is a finite amount of land that can be used for housing, which as time goes on value becomes higher. This was a factor that played greatly in the housing boom of the early 2,000’s and will always continue to cause real estate to appreciate in value as far as keeping your investment ahead of inflation. Investing in real estate has never been the “get rich quick” investment that people assumed it to be during the housing boom. Bottom line, assuming home prices continue to increase 1 to 2 percent better than inflation annually (this has been the proven investment track record for more than 40 years, a buyer needs to own the property for at least five years, with it being maintained and in good marketable condition, to break even and cover selling costs.
In reality, this was the secret formula for those who did make money in the real estate market during the housing boom, and for those who have owned their property for more than 5 years. For most people, their monthly housing allowance is their largest monthly expense. Right now paying that expense out in rent is more than mortgage payments per month and you gain tax returns on that investment along with an investment that increases at the rate of 1 to 2 percent above inflation annually. So interest rates are lower than 40 years ago, prices are projected to be as low as they are going to be. A real estate investment has a utility value other forms of investment do not have – all good reasons to buy a home or investment property in the next few months. In conclusion, real estate is still a very solid investment for the long term.
