Home values are going up. They are expected to go up to the tune of 3.64 per year, according to a report which arrived in my inbox today. I’ve seen higher expected appreciation in values, but let’s run with this one for a while.
At that 3.64% rate that would mean that over a 5 year period the home’s value would grow by 18.4%. Now let’s plug in some numbers. If you were to purchase a home today, for a modest $250,000. In five years, at 18.4% cumulative, that house will be worth $298,749. Now let’s, for this example, say that they buyer put down a typical FHA deposit of 3.5 %, or $8570. At that end of a five year period, their investment of $8570 has grown to an equity position of $48.749. This is about 5.7 times more than their investment.
I may be wrong, but putting that $8570 into a CD at today’s rates would yield an increase on that money by a factor of ….? Let’s just say “Not Much”.
This is how ordinary people amass wealth. Is this a great country or what?
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