10/14/2022
Are Housing Prices Dropping ? Yes
Is a House Still A Good Investment ? Yes
After a prolonged increase
in housing prices, signals are now pointing to a cooling-off period. Instead of home buyers getting excited about this possibility, many wonder if buying a house during a recession is still a wise investment. While there are some exceptions, owning a home is still a smart financial move for most people. This is especially true if you plan to own the property for at least five years.
Here are the most significant reasons you should still make it a priority to purchase a home.
1/. Historically, appreciation in real estate has outpaced the rate of inflation.
2/. One important thing to remember when you make your monthly mortgage payment is that a portion of your bill pays down the loan's principal. In other words, you are building equity. When you go to sell the home, you will get this money back.
3/. Renting, on the other hand, does not build equity. Every month when you pay your rent, you have nothing to show for it other than a roof over your head.
4/. A major benefit of owning a home are the tax breaks. The two most significant are the mortgage interest deduction and the capital gains exemption. With the mortgage interest deduction, you can write off the interest you pay as it relates to your tax bracket.
5/. In addition to building equity in your home, you also gain price appreciation. As stated before, the average annual increase in real estate values is roughly 4%. Using the rule of 72, you can expect the value of your house to double in 18 years. If you made a down payment of $50,000 and took out a loan of $200,000 for 30 years at 6%, after 18 years, you have built up $77,123 in equity. The overall value of your $250,000 home when purchased has increased in value to $500,000. You now have an investment balance of $377,123 ($50,000 down payment + $77,123 worth of principal payments + $250,000 appreciation) if you were to sell.
Source: Forbes
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