Question: Should I invest my money in the stock market, or use it to buy a home?
Answer: Buy a home.
Thanks to the concept of “leveraging,” purchasing a home is by far the best long-term investment. Leveraging means putting down a small amount of money to earn a big return.
For example, say you use that $10,000 to purchase a $150,000 home, and the house appreciates five percent during the first year. That means after one year, the house would be worth $157,500 – a gain of $7,500. Your annual return on your $10,000 investment would be a whopping 75 percent.
By contrast, putting the same $10,000 in the stock market and posting a similar 5 percent gain would only net a $500 return on investment.
And as a home owner, your savings continue to grow in two ways. Every year, a greater portion of your monthly mortgage payment goes to the principal, reducing the overall loan amount. Second, your home appreciates over time, making it one of the very best financial investments. Not only is homeownership a stepping stone to a future of financial security, it also helps to build neighborhoods and strengthen communities. It is truly the cornerstone of the American way of life, and the fulfillment of the American dream.
For more information on why now is a great time to buy, visit www.nahb.org