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Hedy's Hints: Is homeownership still a good long-term investment?

If you are wondering if buying a home in San Diego is a good investment, history shows that home ownership in California is a solid long-term investment. Over the past 42 years, home prices have risen steadily in California almost every year and as recent as 2012, they are back on the rise.

There are many reasons why home-buying shoulder be approached as a good long-term investment – but most importantly it provides both equity accumulation and tax benefits over time.

Equity accumulation

Homeownership is how many American families begin to accumulate wealth. According to data from the Federal Reserve Board, a homeowner’s net worth is 46 times that of a renter’s.

While it is true that local housing markets may experience temporary price declines as well as rapid price increases in the short term, over a typical six-year period of homeownership, home values usually rise at a normal, gradual pace.

Homeowners benefit from the power of leverage. Over 10 years, a $10,000 investment in the stock market at a normal 10 percent market rate of return would yield $23,600. The same investment as a down payment on a $200,000 home at a normal appreciation rate of 5 percent would return nearly 5 times the stock market return, at $110,300. Dollar for dollar, the rate of return on an individual’s cash down payment on a house is substantial. Although buyers typically use their own money to cover a small portion of the purchase price, the home appreciation they realize is based on the total value of the property.

Tax benefits

What some may not know is that a home purchase can lighten your tax load. You'll find homeownership opens up a world of potential tax savings. Typically, the interest paid on your mortgage is tax deductible, which can provide significant financial relief.

Unexpected benefits

Not only is homeownership a great investment, but there are some unexpected benefits that come along with owning a home.

• Invest in your future. Your monthly mortgage payments are not going into the pockets of a landlord. Instead, with each payment, you build equity in your home and contribute to your own long-term, personal investment.

• Develop your credit further. Your credit continues to be important. By making monthly mortgage payments on time, you will further improve your credit history and it will help you with future and additional investments.

Housing is not a quick-in, quick-out investment. Housing is a key driver of the economy and continues to be a solid long-term investment for most American households. Housing generally provides steady returns that are unaffected by volatile movements in the stock market. When purchased for the long term, housing is one of the safest investments individuals can make.

Hedy Goldman has lots of knowledgeable information to share. She has been practicing real estate since 1996 and is a 2010 gold award winner at Windermere Real Estate SoCal. Hedy sells all over San Diego, but specializes in North County Coastal. She can be reached at (858) 504-2334 or San Diego Realtor.