An article in Realtor magazine this month reports a study done by the National Association of Realtors. It revealed that home owners' wealth is 50 times that of renters, $205,000 compared to $4,200! The study compared average equity over 5, 10, 15 and 20 years of ownership. Honolulu topped the list at $272,000 equity for those who bought in the last 5 years, San Francisco and Oakland weighs in at $105,000. Hardest hit areas like Detroit have negative equity for those who purchased 5 years ago, however typically not that much. Other Midwest cities such as Indianapolis are still negative but only by $1000.
10 year ownership even in Detroit shows an average of $10,000 equity still remains for the typical homeowner. 15 and 20 year ownership scores $60,000 and $78,000. In Indianapolis the 10, 15 and 20 year gains are $19,000, $47,000 and $68,000 respectively. Honolulu homeowners have enjoyed a run up of $485,000 in the last 20 years, but then who would want to endure Hawaii weather for 20 years just for a little money? (...not in the article...it's John's editorial comment)
John's Take on This
The Columbus market is similar to Indianapolis. Some areas have bottomed out and have been appreciating for the last 6 months to a year. Appreciation should be in the 5-6% range in a couple of years. It will follow the inflation rate and be a point or two less than the interest rates, both which are bound to increase. After all, appreciation is the politician's "feel good" word for inflation. Don't moan and groan about the coming inflation. Make it work for you. Don't moan and groan about the coming tax increases. Make it work for you. Position yourself to gain equity and save taxes. It's not rocket surgery. You have to own your home and then you need to invest in rental property.
Go forth boldly and capitalize on the low real estate prices and low interest rates (5% or less)!