COMPARISON TEST BETWEEN STOCKS AND REAL ESTATE

Recently I saw on one of the national news channels a respected stock analyzer expound on the great deals on the stock market with the quote “its time to sell your real estate and get into the stock market”. Nothing can be further from the truth. The stock market continually is a very poor investment choice.

Lets consider basic economics and compare stocks with real estate. First of all supply and demand. Stocks are mass produced as the need arises. On the other hand Real Estate can not be mass produced or even reproduced yet there is an ever increasing demand while there is an ever decreasing supply of useable land. This lack of balance is what makes real estate a very good investment. As demand goes up so does value.

Stocks are not a fix commodity like real estate it. Business do go out of business and their stocks can become worthless.

Real Estate continues to grow in value in the greater Seattle area. Values in the housing market last year grew between 18 to 24 percent. That means that a $300,000 home one year ago is now worth between $354 to $372,000.

How many stocks do you know of that have shown that much return in the last year or over the last 10 years for that matter? Very few.

Real Estate can be financed. First time home buyers can get into a $350,000 home with nothing down and still take advantage of inflation. This means that with virtually no money into the purchase when they bought they will still make at least $35,000 (at an average of 10% per year) in the first year. How do you compute the return on their invested dollar?

Investment properties require a down payment in most cases and so the rate of return will be less then for the first time home buyer. But, again still a lot greater than a stock of comparable value.

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