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A house is a saving mechanism with the potential for solid gains.
Sure beats my savings account!
A house will normally appreciate, but most barely keep up with or slightly exceed inflation, which is not what you want from an investment. Don't forget about all those expenses you have to maintain that investment - maintenance, property taxes, closing costs to buy/sell, etc. There are many people much smarter than me about financial topics, and the consensus from those that have crunched the numbers is that a house should not be looked at as investment. Of course, there are always exceptions where a property will skyrocket in value, just like there are with individual stocks.
Just a bedrock floor price and value support and a greater pool of buyers for resale.
This.
The town that we moved here from, the top still has not come close to recovering.
Case in point, at one time my sister could have sold her house for around $2 million. And she should have - she had no need for the schools and her oldest had gone off to college with the next two soon to follow. Instead, she used the house as an ATM. Market crashed 4 years later, taxes were going up like crazy and when she finally sold it in 2010 for $1.2 million, she had exactly one offer after 3 months on the market. Those people have been trying to sell it for the last 3 years....for $1.2 million. And they put at least $100K into it after the moved in.
I sold my house in the same town also in 2010 for a lot less money...but the price of my home from the top to the bottom of the market didn't take that big of a hit either.
A house will normally appreciate, but most barely keep up with or slightly exceed inflation, which is not what you want from an investment. Don't forget about all those expenses you have to maintain that investment - maintenance, property taxes, closing costs to buy/sell, etc. There are many people much smarter than me about financial topics, and the consensus from those that have crunched the numbers is that a house should not be looked at as investment. Of course, there are always exceptions where a property will skyrocket in value, just like there are with individual stocks.
Welllll......
I bought stock and the company went bankrupt.
It was definitely an investment. And, I lost every penny, plus brokerage fees.
It was just not a great one.
Most people who sell a house get a better return than I did on that stock gambit.
People should have their entire portfolio in order at any time, rather than putting all their eggs into a house as their only investment vehicle, but people who are turning over in 4-10 years must look at ROI on the property cost.
Too many make obvious mistakes that will cost them in the long run.
I bought stock and the company went bankrupt.
It was definitely an investment. And, I lost every penny, plus brokerage fees.
It was just not a great one.
Most people who sell a house get a better return than I did on that stock gambit.
People should have their entire portfolio in order at any time, rather than putting all their eggs into a house as their only investment vehicle, but people who are turning over in 4-10 years must look at ROI on the property cost.
Too many make obvious mistakes that will cost them in the long run.
To add to this..., I've never been able to live in any of my mutual funds either.
Our market, drawing the number of transplants that we do, is affected by the health of other metros as much as our own.
I've always thought that there is a dividing line in the market between the point where 20% down + a conforming mortgage puts a transplant into a home and the point above that threshold. Call it Low $500s. Anything above that point is subject to a less consistent flow of buyers. Going forward this will likely magnify itself as people try to downsize and discover that the next generation can't scrape together a down payment.
Another factor is the fact that quite frankly $500K buys way more house than most transplants are used to in the markets from where they came. We hear it all the time right here on C/D-people looking to move here with $800K budgets who find that they can buy as much home as they really need for considerably less than that.
I also think the current new construction in the $600K-$900K price range in hot zip codes like 27519/27502/27540 is not likely to appreciate based on the fact that 80% of it is slapped together and those homes will suffer deferred maintenance leading to obsolescence far more quickly than the better quality properties built 10-20 years ago.
Personally and financially, I'd rather own 4, $300K homes and a single $1.2M home.
IMO, if you have to ask if purchasing a home at the very high end of a market is a good investment, you really can't afford the risk of buying that home.
Personally and financially, I'd rather own 4, $300K homes and a single $1.2M home.
IMO, if you have to ask if purchasing a home at the very high end of a market is a good investment, you really can't afford the risk of buying that home.
In your example above, live in 1 and rent out the other 3 houses. If the positive cashflow from the rentals can pay for your owner-occupied house after they pay for themselves, then those are good investments across the board!
any good that only a small % of people can afford if they want it will always grow in price much more slowly than a good that everyone can afford and everybody wants/consumes.
any good that only a small % of people can afford if they want it will always grow in price much more slowly than a good that everyone can afford and everybody wants/consumes.
that's pretty basic economics, without a PhD
Not exactly. It all depends on supply and demand of those two goods.
It all depends on demand. And that's what I said, in different words:
a small % of people can afford (# of demanders) ... if they want it (#of demanders) AND
everyone wants and consumes (# of demanders).
There is a 1.3 year supply - 284 for sale, 217 sold over 12 mos - of $1MM+ homes. So, the demand was 217 people.
Conversely, between 200K and $350K (economically valid range given median homes prices) there is only a 78 day supply of homes. Even though there's SIX TIMES the number of homes for sale. That's because 38 TIMES the number of homes was sold.
The supply of lower homes is vastly greater than the supply of $1MM+ homes.
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