Why Buying a Home is a Good Idea
As a general rule, a home will appreciate in value roughly four or five percent each year. In some years, this number will be more and in some it will be less. Of course, this will also vary from neighborhood to neighborhood and region to region.
Initially, five percent may not seem that high. It is possible for other investments such as stocks to appreciate at a much higher percentage, and you could probably earn over the same return with a very safe treasury bills or bonds investment.
However, you must take into consideration the value of the home.
Lets assume that you have purchased a home at $200,000 and you have not paid in cash for the home. You got a mortgage. But lets assume you were able to put down a 20% downpayment, which would be an initial investment of $40,000.
With an annual appreciation of 5%, a $200,000 home would experience an increase in value of $10,000 over the first year. This means that you have earned $10,000 on a $40,000 investment. This makes you annual return on investment, or ROI, an impressive 25%.
Of course, you will be paying your mortgage and property taxes, along with a few other costs. However, due to the fact that the interest on your mortgage and property taxes are both tax deductible, the government is basically subsidizing the purchase of your home.
For these reasons, you rate of return when buying a home is larger than most other invesments you could make.
Why NOW is a Good Time to Buy
There is no point in trying to hide it, the housing market did experience a detrimental downturn in recent years. However, with home sale and housing prices on their way up, economists are stating that this is a sustainable recovery and housing market has indeed reached bottom. As with any investment, the idea is buy low sell high. With rock-bottom prices and ultra-low mortgage rates, now is a great time to invest into the housing market with great future earning potential.
Even if you view a house as a home, not an investment, now is still a great time to buy. With housing affordability at all-time high levels, you will have the ability to buy your dream home now more than ever, or at least buy much more home than you would have been able to a few years ago. As prices continue to rise these great deals may be slipping out of your hands.
So act now, talk to a Realtor and lender to determine what you can afford and begin the search for your dream home!