Year after year, home-ownership remains the single smartest financial investment you can make.
I know: that’s pretty bold. But let me back it up with some cold hard facts. Let’s take a look at how buying a home with minimum down in 1986 compares with the same investment in a Dow Jones Index Fund and also, in gold. We’ll assume you had been saving and had $3,600 to invest in January, 1986..
In January 1986, gold stood at $748 per ounce. The $3,600 would have bought you just 4.81 ounces of gold. By January of 2016, the price of gold had soared to $1,235 an ounce and your investment would be worth $5,940 - an increase of $2,340. It’s a 65% increase in value over 30 years and amounts to about $78 a year. I think we can all agree that gold would have been a pretty foolish investment 30 years ago.
So, what if you put your $3,600 into a nice Index Fund based on the Dow Jones Industrial Average? In January of 1986, the Dow was at 3,398. This past January, 30 years later, it stood at 16,516, an increase of 386%. Sounds pretty good, but the $3,600 you invested in 1986 would now be worth just $17,496. Again, investing in the stock market probably wasn’t the wisest thing to do with your money 30 years ago!
But what if you used that $3,600 to buy your first home? In January, 1986, the median price of a single family home nationwide was $86,600, so the $3,600 you had would be sufficient to cover a minimum down payment and pay some closing expenses. In January of this year, the median home was selling for $213,800, which is a 147% increase in value BUT, when we shift from commodities to real estate, value is not the key metric! What matters is equity. The day you bought the house in 1986, you had something less than $3,600 in equity in the property. Now, 30 years later, with a paid in full mortgage behind you, you have $213,800 in equity. That’s an increase of 5,838%
To summarize:
$3,600 invested in January 1986 -
- In gold, would be worth $5,940 today
- In the Dow, would be worth $17,496 today
- In a home, would be worth $213,800 today.
I know this sounds like I’m ‘puffing the goods,’ but I’m really not. This is all based on historical data. Not only would your small nest egg grow bigger in real estate, you’d also have a nice place to live while it was growing! And, you’d have another great benefit in the huge tax savings you’d achieve by being a homeowner rather than a home renter.
Here’s the important take-away from this: if you’re renting, you need to look at home-ownership NOW. There are all kinds of programs to help get you into your first home, some even offering down payment assistance! With home prices in Guilford County increasing at about 4% a year now, each year you wait to buy will cost you 4% more.
The professionals at The Vincent Group at GreatNest have the knowledge and the tools to make your home-ownership dream a reality. Call us today for a free, no-obligation consultation.
As always, at The Vincent Group at GreatNest we are proud to save our clients money by charging a low set fee instead of a percentage commission. We are a full-service real estate company serving buyers and sellers in Greensboro, High Point, Winston-Salem, Summerfield, Oak Ridge, Jamestown, and other Piedmont Triad areas. Please get in touch with our experienced real estate professionals by calling (336) 790-5210 or by emailing Steve Vincent. Visit our website at greatnest.com.