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During 60 or 70 years of life as an adult, you’ll probably do better financially if you spend most of your life owning homes rather than renting, since you’d build equity and avoid constant rent increases.

But how good an investment is a home? Not surprisingly, the National Association of Realtors insists the average homeowner does just fine.

“Despite swings in the housing market in recent years, the fact is most long-term owners see healthy gains in the value of their property,” NAR President Vicki Cox Golder said in a recent announcement of the 2010 edition of the association’s annual Profile of Home Buyers and Sellers.

To support that point, the NAR said its latest survey showed that “the typical seller who purchased a home eight years ago experienced a median equity gain of $33,000, a 24% increase, while sellers who were in their homes for 11 to 15 years saw a median gain of 40%.”

Given the nationwide home price collapse since 2006, that sounds pretty good. But the two periods cited in the NAR study also cover the housing bubble early in the decade. In fact, a lot of the downturn was merely taking away fat price increases that were only fueled by the bubble. So in looking at periods of eight to 15 years, NAR looks at home price behavior that, on average, is not so out of the ordinary.

And what the numbers actually show is that homes have been a rather poor investment. A 24% gain over eight years comes to about 3% a year – or a tad less considering compounding.

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That’s really nothing to brag about. A saver might have done just as well in a bank account and would have had much easier access to the money.

With inflation taken into account, homes gained just about nothing in value. And the NAR looks only at the difference between sales price and purchase price. If you add interest charges, property taxes and maintenance, and subtract costs like the title insurance purchased when the home was bought and the realtor’s commission paid when it was sold, the home is a money-losing investment.

The NAR’s finding of a 3% annual home price gain matches the 3% to 4% found in other studies. In contrast, the stock market gained an average of 10% a year in the 20th century, though it too has not had much to brag about in the past decade.

Of course, you can’t live in your stock portfolio or bank account. So if you must spend money on shelter it’s better to spend it on a home that produces some wealth rather than an apartment that produces none, assuming you will stay in the home you buy long enough for appreciation to offset buying and selling costs.

How long is that? Most experts say the break even point should come after four or five years of ownership. The NAR study indicates that the average homeowner understands this. First-time buyers reported that they planned to stay in their homes for 10 years, and people who had owned previously said they’d stay in their new homes for 15 years.

People have three basic options in housing: rent, buy a modest home or buy an expensive one. If you’ll stay put long enough, buying is better than renting. But it’s better to buy a modest home than an expensive one, so you can invest the savings in something else with better returns.

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