Is Your Home A Good Investment?

[steven johnson]

Conventional wisdom is that that home ownership is a route to wealth. Under that widespread view, the recent housing bust is just temporary. Since early 1994 when home prices were near a historic trough, the ten-city index has risen from a value of 76 to 151. Annual return: 4.7%. Inflation over that period: 2.5%. That's still only a real return of 2.2% a year above inflation. You could have done better with government bonds.

Human nature likes the short term. Which is why so little attention is paid to something that is probably more important, if less urgent: What the latest data show about the long-term of the real estate market.

Conventional wisdom long held that home ownership was a route to wealth, and the imputed rent -- in other words, the right to live in your home -- was just part of the value you got from it. Under that widespread view, the recent housing bust was simply a temporary, though deep, pothole.

Yet for very many people, even over the past 15 or 20 years, the imputed rent may have been all, or nearly all, the real value they actually got from their home.

Yes, it's only recent data. And it's only ten cities. But there's some reason to suspect these numbers may, if anything, flatter real estate performance. After all, it's hard to look at the data and figure the bust is now over. And if they fall further, those long-term return figures will fall too.

Is Your Home A Good Investment?

[Warpy]

1. Yes and no

Yes because even if the value decreases, it will always have intrinsic worth as shelter for myself or someone else.

No because it doesn't produce income of any type, only paper profit when values are rising but which won't be realized unless I sell, at which time I'll have to pay for an alternative form of housing or reinvest in another house or condo.

I bought as a hedge against rising rents and because building equity while realizing a small income tax break was attractive, not because I thought I'd get rich quick in real estate. The latter has generally been a sucker's proposition for the single homeowner.

[MercutioATC]

4. There's also the home mortgage interest deduction to consider.

It's free money.

[Blue Meany]

2. I'm making it ito a good investment, by gradually making changes

so that it is a home that is sustainable and can largely support its inhabitants (who I expect to be my family). I am doing this by planting fruit and nut trees, building up the garden, using non-oil sources for heating and cooking, adding insulation and a solar/space greenhouse on the south facing wall; installing a solar water heater and solar power, etc. When this process is completed, the home will have incredible intrinsinc, regardless of the dollar value.

[safeinOhio]

3. Like 90% of the stuff we own

a house is a hole to throw money down. Upgrades, improvements, maintenance, taxes and up keep. Yet you do realize a return. Not so much on cloths, cars, furniture and food.

[northernlights]

5. depends on how you define investment

My condo was a roof over my head and a degree of autonomy in a time when rents and homeprices were skyrocketing. I paid off the mortgage in 10 years and saved like the dickens after that.

My first house has been an expensive education, but the best educations do tend to have a price. I bought it cash, though, so although I'll be losing money when I sell it, I have learned a *lot* of transferable skills, from rudimentary carpentry to gardening, and a lot about what I want and need in life. Most of my acquisitions here are also transferable -- the dogs and tools will come with me to the next place and the next. And I was able to sell the garden tractor for a good enough price that it was cheaper to have bought it than hired out the work I did with it, so I got *paid* for that education, lol.

I bought a place that was not what I truly wanted or needed for myself, but I figured would be sellable even in a down market. At 1300 square feet, more space than I need or want, but downsizing for a large portion of the population. Less land than I needed for myself, but plenty for someone who wants to raise small livestock such as goats or do heavy-duty gardening. Near the ocean but a couple hundred feet above sea level.

So hopefully it's not a total disaster. There should be enough $$ from the sale to start over. This time in exactly what I want and need...