Is Home Ownership A Good Investment?
|April 3, 2008||Posted by Roshawn Watson under Uncategorized|
Since late 1990s, the average prices have nearly doubled. This has caused many people to try to purchase as much home as they can afford. However, if you look at a more long-term view, you will get a more complete picture. Robert Shiller, a Yale Professor, tracks real estate history. According to his research, from 1890 -1990, there was virtually no change in real inflation corrected real estate prices.
Professor Jack Clark Francis, Baruch College, research also indicates that single family homes are not a good investment when compared to other asset classes. His research indicates that from 1978-2006 the S&P; 500 has averaged a 13% return, stock from small companies (small cap) has averaged 16% while single-family homes only realized a 7% ROI (return on investment per annum). Interestingly, he corrected for rental income in his calculations.
There are several things that eat up profits from appreciation. For example, home insurance, maintenance costs, and repairs are routine expenses for home owners. As someone who recently repaired a roof, believe me when I say that I know this to be true. However, home owners are able to deduct mortgage interest and earn tax free profits upon selling. Additionally, there are other intangible benefits, such as the psychic boost one gets, better school systems in certain zip codes, and higher status.
Copyright 2012, Roshawn Watson, Pharm.D., Ph.D. All Rights Reserved.