Your Home Investment Has Returned Zero in 10 Years
NEW YORK (TheStreet) -- Here's a sobering fact for anyone who clings to the idea a home is a great investment: With the big gains of the past couple of years, the average U.S. home is now worth what it was in 2004. In other words, as investments, homes have returned zero in 10 years.
By comparison, stocks have been terrific. Despite the huge selloff during the financial crisis, the Standard & Poor's 500 has gained about 106% over the past 10 years, assuming all dividends were reinvested.
The dreary facts on long-term home prices, contained in this month's S&P/Case-Shiller Home Price Indices, is accompanied by data showing that recent home price gains are slowing.
"Although home prices rose in April, the annual gains weakened," said David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices. "Overall, prices are rising month to month, but at a slower rate. Last year some Sunbelt cities were seeing year-over-year numbers close to 30%, now all are below 20%: Las Vegas (18.8%), Los Angeles (14.0%), Phoenix, Ariz. (9.8%), San Diego (15.3%) and San Francisco (18.2%). Other cities around the nation are also experiencing slower price increases."Also see: Fewer Cash Home Sales Is a Good Sign Also see: How Stagnant Wages Have Trapped the Housing Market you could break even on a home in two or three years, which isn't bad. Remember, too, that the bad experience of the past decade was unprecedented. Many of the conditions that caused the home-price bubble, such as easy money and irrational exuberance, don't exist today. It may take several more years, but the housing market appears to be returning to normal. That means that buying a home is probably a better option than renting so long as you plan to stay put for four or five years.
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