Is Real Estate (Still) a Worthy Investment…for Me?

By Jacquette Timmons

According to the U.S. Census Bureau, the rate of U.S. homeownership is down to 66.4%, the lowest since 1998. Yet, a recent Pew Research Center study revealed that 81% of adults agree that buying a home is the best long-term investment a person can make.

But are these statistics enough to answer the question: Is Real Estate (Still) a Worthy Investment…for Me?

As a result of the financial/mortgage crisis of 2008, today’s real estate market is significantly depressed as compared to its market value highs of the mid-2000’s. And quite a few current homeowners are underwater, i.e., their mortgage is greater than the current market value of their home. This combination has left a number of people skittish about real estate. So, if you are asking yourself the above question, the key to ascertaining if now is the right time for you to invest in real estate is know thyself, know thyself, know thyself!

Here are some key lessons from the crisis that will help you:

Know Thyself
Depressed real estate values coupled with low interest rates make this a buyers market. Not only do you as a buyer have more housing options from which to choose, you also probably have more negotiating room in terms of the purchase price. But “buyer beware.” It is important to have clarity as to whether the purchase you are making is a short-term real-estate “play” or for the long-term (e.g., you are buying a home you plan to live in for 15-20 years). Understanding your time horizon – which is not to be confused with attempting to time the real estate market – is paramount for real estate success and satisfaction.

Know Thyself
Understanding the “why” behind your purchase will help you manage your expectations with regards to appreciation. According to a Case-Shiller study the value of a home in the 100 years from 1900 to 2000 increased by 3.35% per year, just a little better than the rate of inflation. Another Case-Shiller study covering the period of 2000-2006 reports appreciation of 70%! It’ll probably be years upon years before we see appreciation values reach double-digits. So, temper your expectations of how much you’ll be able to sell your house for when it is time to sell.

Know Thyself
Your home is usually your biggest asset…or albatross. Take an honest look at your life-style; is it ideal for the responsibilities that come with homeownership? Or, would you be better off renting for the flexibility it provides – especially at it pertains to being able to easily and quickly relocate?

The truth: For someone, now is always a good to invest - whether in stocks or real estate. The critical question is whether the time is right for you.