Real estate continues to be a strong investment

Opportunities for big, quick wins in residential real estate tend to come and go in cycles. When a local market is hot, families may find it possible to purchase a home at an attractive price, fix it up, and see it increase in value in just a few years.

When the same local market is at the low end of the appreciation cycle, making a profit on the family home can take much longer, but the payoff can be just as satisfying if price and location are carefully considered.

Even in uncertain economic times like these, history shows that real estate is one of the strongest investments a family can make. During the Great Depression of the 1930s, when the stock market plunged as much as 89 percent, home prices fell just 39 percent. According to most research on housing trends, prices stay at the same level all the time and most often appreciate faster than the rate of inflation. House prices actually rose an average of 10 percent during the recessions of the mid-1970s and early 1980s.

CENTURY 21 statisticians report that the home appreciation rate since 1990 has been around five percent nationally, with inflation hovering around four percent. Homeowners obviously still stay ahead of the real estate game on average.

And, with the lowest mortgage interest rates in two decades, real estate today is a more attractive investment than it has been in years.

First-time buyers are the big winners in this environment. Budgeting can help you and your family decide what you can afford. Once you’ve determined a price and chosen your desired community, shop around to find the best home you can buy for your money. This strategy can help you get a higher appreciation two to three years from now.

This is also a great time to buy a second home or vacation home. A bargain cabin in the woods today could generate a terrific return when home prices rise. Affordable second home prices also allow you to purchase a vacation home that can serve as a springboard for a larger retirement in the future.

But appreciation isn’t the only advantage of buying a home. The federal government believes that home ownership is so important to our country’s future that it allows mortgage interest to remain the last substantial tax shelter for families. Homeowners can also take deductions on their property taxes. And, the gain on the sale of your home remains tax-free as long as you buy a home for the same or greater price.

So before you decide this is not a good time to invest in residential property, re-examine the financial benefits of owning your own home and put them to work for you.