So until recently, housing has definitely not been that great of an investment. From the 1950s through 2000, the average selling price for a house has only gone up by ~6%/year, which is barely the rate of inflation. Combine that with the fact that the average house is now far bigger/nicer than houses from that time period, and you'd probably never actually make that 6% since you'd be putting money into renovating, expanding, etc. So finally did the math on my parents house:
Purchased in 1977 for $38k
Mortgage rate was 6.75%, I think
$40k addition in 1993, refinanced the whole loan into a 15y @ 6%
Zillow.com thinks it's currently worth $339k.
Putting all of that together (including the $40k addition in 1993 but leaving out the rest of the improvements/upkeep), and their average annual increase in value is.... 6%. They're barely beating inflation, and that doesn't even take into account redoing the kitchen, bathrooms, flooring, siding, roof, etc over the past 32 years. The math really only works out in their favor when you figure in that they now own the house outright, are retired, and don't have to worry about paying rent (as well as the cost of renting over the past 32 years).
They had the optimal buying situation (buying once, living there till you paid off the mortgage) and they still barely beat inflation and barely beat what they were paying in mortgage interest once you figure in the tax aspects. Makes you wonder what the math is going to be for all of the people who bought in the last 10 years... (and what people were thinking that real estate is some amazing investment opportunity)
Purchased in 1977 for $38k
Mortgage rate was 6.75%, I think
$40k addition in 1993, refinanced the whole loan into a 15y @ 6%
Zillow.com thinks it's currently worth $339k.
Putting all of that together (including the $40k addition in 1993 but leaving out the rest of the improvements/upkeep), and their average annual increase in value is.... 6%. They're barely beating inflation, and that doesn't even take into account redoing the kitchen, bathrooms, flooring, siding, roof, etc over the past 32 years. The math really only works out in their favor when you figure in that they now own the house outright, are retired, and don't have to worry about paying rent (as well as the cost of renting over the past 32 years).
They had the optimal buying situation (buying once, living there till you paid off the mortgage) and they still barely beat inflation and barely beat what they were paying in mortgage interest once you figure in the tax aspects. Makes you wonder what the math is going to be for all of the people who bought in the last 10 years... (and what people were thinking that real estate is some amazing investment opportunity)