A $1 investment in the S&P 500 index at the beginning of 2000, was worth 91 cents ten years later after ” The worst decade in stock market history”. What made the Lost Decade so bad wasn’t just the crash of 2008, but also the dismal years from 2000 through 2002. In order to earn an overall 7% return on stocks for the first 40 years of the 21st century, an investor would have to earn an average 10% return from now through the next three decades.
The other side of the pendulum would be the housing market. I’ll use my area of expertise ( Davis,Ca.) for the illustration. Our average home sales price in the year 2000 was $262,000. The sales price for 2010 was $496,000. Using the stock comparison for every $1 spent on your real estate investment, the return would be $1.89. There are no guarantees with any investment, but even though both markets ( housing & stocks) had declines throughout the last decade, the better investment by far was the real estate investment.
There are even more benefits now with mortgage interest rates at an all time low of 3.94%. How these rates are beneficial over the long haul are magnified by calculating the difference of just a 1% increase to 4.94%. Based on a purchase price of $400,000 with 20% down, you would pay an additional $70,000 over the life of the loan. A 2% increase and you would pay approximately $140,000 more over the loan life. Rest assured rates will go higher. There’s no better investment than real estate, now and into the future.
” Learn the past, watch the present, and create the future”, a great quote to live by. Please visit my web site at www.JohnnyBrooksHomes.com for helpful tips on buying or selling a home, check out my other blogs and easy access to view local area homes for sale.