Your Home… Your Best Investment?

Thank goodness for real estate. Owning your own home is one of the best investments you can make. Capitalism itself is based on individual property rights. I believe that real estate will outperform stocks over the next five years. If I had $1 million to invest right now, I would buy property over investing it all in the stock market. Am I worried about a bubble in the real estate market? You bet I am, but, in my opinion, real estate prices are going to go much higher before we have to worry about a bursting bubble. The froth in the market is only going to get thicker.

Recently, a report by the National Association of Realtors (NAR) revealed some startling data about the real estate market. The association reported that sales of existing U.S. homes grew a substantial 4.5% to a record high in April, with home prices generating the largest annual gain in almost 25 years. Equally as stunning, the NAR reported that the national median home price rose 15.1% in April (as compared to the same month in 2004) to $206,000. This substantial price increase was the largest since November 1980.

According to the government’s Census Bureau, since 2000, the number of homes across the country valued at $1 million or more has almost doubled. Government research now estimates that one percent of all American homes are now worth over the $1-million threshold. California has the highest concentration of million-dollar homes, followed by Connecticut, the District of Columbia, Massachusetts, and New York.

The hot housing market is still being fueled by relatively low interest rates, rising incomes, and a desire by consumers to put money into a “hard” asset, rather than financial securities. The trend is intact, and I believe prices are only going to go higher.

I like the prospects for farm land over urban real estate. Naturally, urban prices have led the way with price increases, but country properties and cottages will outperform over the next decade as the baby boomers retire and exit the big cities. This trend is already happening. If you are thinking about a country property, you better act soon, because prices in this market sector will only go up.