Your Cincinnati home as an investment.
Thursday, April 12, 2007
Daily Real Estate News | April 9, 2007Retirement Savings Should Go Beyond Real Estate
Plan on retiring with all the equity from your home? Think again. While the benefits of homeownership are undeniable, residential real estate is no replacement for retirement savings through vehicles such as a 401(k) plan or an IRA, says Fidelity Research Institute.
Fidelity Research Institute studied inflation-adjusted returns on a dollar invested in residential real estate from 1963 to 2005 and discovered that on average returns on low-risk Treasury securities beat housing over the same period. Stocks performed even better, averaging a return of 5.95 percent versus 1.35 percent for residential real estate. Even in the Northeast and the West Coast, where the growth in real estate values has been the highest, stocks and bonds still earned more money per dollar than real estate.
This suggests that buying less house and more stocks might serve a home owner’s long-term financial interests better than overextending himself to buy a bigger house than he can afford.
Nevertheless, there are many good reasons to own a home. Fidelity’s researchers don’t deny the advantages of homeownership and the magnitude of home equity, citing a 2005 Harvard University study that concluded more than 80 percent of Americans over age 65 own homes worth $3.95 trillion, nearly a third of seniors’ wealth.
People who own their homes have net worths substantially higher than renters — no matter what their age, income level or race — and home equity can create supplemental income for retirees, the study states.
Source: The Washington Post, Martha M. Hamilton (04/08/2007)
Plan on retiring with all the equity from your home? Think again. While the benefits of homeownership are undeniable, residential real estate is no replacement for retirement savings through vehicles such as a 401(k) plan or an IRA, says Fidelity Research Institute.
Fidelity Research Institute studied inflation-adjusted returns on a dollar invested in residential real estate from 1963 to 2005 and discovered that on average returns on low-risk Treasury securities beat housing over the same period. Stocks performed even better, averaging a return of 5.95 percent versus 1.35 percent for residential real estate. Even in the Northeast and the West Coast, where the growth in real estate values has been the highest, stocks and bonds still earned more money per dollar than real estate.
This suggests that buying less house and more stocks might serve a home owner’s long-term financial interests better than overextending himself to buy a bigger house than he can afford.
Nevertheless, there are many good reasons to own a home. Fidelity’s researchers don’t deny the advantages of homeownership and the magnitude of home equity, citing a 2005 Harvard University study that concluded more than 80 percent of Americans over age 65 own homes worth $3.95 trillion, nearly a third of seniors’ wealth.
People who own their homes have net worths substantially higher than renters — no matter what their age, income level or race — and home equity can create supplemental income for retirees, the study states.
Source: The Washington Post, Martha M. Hamilton (04/08/2007)
