Is Buying a Home a Risky Investment?
It made national headlines this week. A report by Zillow.com stated that the nation’s most iconic home, the White House, has lost nearly a quarter of its value. As reported by Zillow.com, the 55,000 square foot home on 18 acres in the heart of Washington D.C. has not been immune to the housing crisis, shrinking in value from $292 million to a mere $252 million dollars in less than two years.
If the most iconic home in the United States is not immune to a decreased return on investment, what about the home you are considering?
First off, when examining such a short period of time, like the two year span in the report by Zillow.com, there are not too many properties which yeild a postive return on investment. This news should not be surprising. We know that for 2011 we are going to see a slight dip in home prices through the end of the year. This is a continuation of the downturn in pricing which we have seen since roughly 2006. However a home is an investment. Over time, it is the long term return on investment that we should be concerned about, much like how we think about investing in stocks.
Here is how real estate compares to the three well known stocks on Wall Street:
When looking at the return on investment starting in January of 2000 (the beginning of the economic boom) through December 31st of 2010 (near the bottom of the recession) the returns on real estate are significantly higher than those of stocks. This is especially true locally in South Central Wisconsin, where we see an 80%+ return on investment for single family homes and condos, compared to 43% nationwide.
It is easy to get caught up in the doom and gloom of the reports like those on the White House, but it is important to examine the facts. Even during the most difficult period of homeownership our country has seen, real estate continues to be a strong and worthwhile investment, especially in our local South Central Wisconsin Market.
Category: Buyers
