As a stock broker in California, one of the hottest housing markets in the US, – real-estate was my competition. “Everyone” was making money in real-estate; so, why invest in the stock market?
I needed an angle
I went to the Board of Realtors and got prices for 2, 3 and 4-bedroom homes in the area, both at the current price and10 years prior. I did the math to calculate what annual return these houses were creating for that ten year span, and then compared that to the S&P 500 Index for the same time period.
The index clearly beat all three home styles; without the hassles of ownership: like painting; plumbing problems; yard work; or replacing roofs. Now, I had my argument to help people invest in the market.
Ok, that was then and this is now
Using Zillow.com, I recently looked up what the home, we used to own, was now worth. It was listed at $862K. Again, I did the math and found that over the last 31 years, since we bought it, the house had appreciated 6.4% annually. Sounds OK, except that there were property taxes, maintenance, and repairs that would need to be deducted – lowering the annual return.
Then I wondered, what if we had put the money used to buy our home into the S&P 500? So I calculated that figure also.
Are you ready?
It would be worth 3 million dollars today! The return is over three times the current value of the house; as the Index produced a 10.46% annual return during those 31 years.
Even the down payment alone, had we invested it, would have grown to $765K, about the cost of the home today. Amazing.
What about you?
Use this calculator and see how your money could have grown. You can use Zillow to see your current home value. You do the math.
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