Is Your Home Really a Safe Investment?
Buying a house is widely considered to be one of the best investments you can make. If you own your home, then your housing payments are being put to use to pay off your mortgage and eventually make the house 100% yours. Rent payments are simply gone forever. But some homeowners think of their houses as more than just homes: They expect to make a substantial profit on the purchase. Here's why that can be a really bad mindset to have.
While it's true that home prices steadily rise over time, what many people fail to realize is that this rise has more to do with inflation than anything else. Inflation is the gradual increase in overall prices; it's the reason why a burger you could once buy for $0.10 now costs $2. Over the long haul, the average annual rate of inflation in the U.S. is about 3%. If you buy a house for $200,000 and later sell it for $300,000, once you add in the effects of inflation you may find that there was little, if any, change to the actual value of your home. During the century between 1890 and 1990, home prices rose by roughly 0.2% per year once corrected for inflation.
Image source: Getty Images.
Source: Fool.com
