Despite all the gloom and doom prognostications of recent months, real estate remains an absolutely top place to invest your money, for a number of reasons.

1. Real estate investors who hold property over the long term (five years or more) virtually NEVER lose money! Only those who buy at the height of a boom and then sell quickly face a potential loss.
2. Much of the bally-hooed "losses" in real estate that have been trumpeted around are really "phantom" losses. For example, an investor in Miami real estate whose property is worth $10,000 less today than it might have brought in 2006 may feel as though he has lost value, but if this person has held the property for five years, he probably had a net gain of something like $200,000 on his property; it just felt like a loss because he knows the gain would have been$210,000 a year earlier!
3. Just 5% annual appreciation in real estate nets more than 5 times as much as a 10% annual appreciation in stocks! Sound implausible? Think again. This results from the tremendous power of leveraging your money that is possible in real estate. Here's a concrete example below:

          Let's imagine two women with $10,000 to invest. The first invests her $10,000 as a down payments in a home worth $100,000. The property increases in value at only 5% per year. So at the end of the first year, the house is worth $105,000. This is an increase of only $5000, but $5000 represents a 50% return on her investment of $10,000! At the end of the second year, her property has reached a value of $110,250. Year three leads to a value of $115,762.50. The fourth year's value is 121,550.62, and at the end of five years, she has a property worth $127,628.15. Thus, in five years, her $10,000 investment has turned into an equity of $37,628.15! That is a little over 376% in just five years, for a yearly return on investment of over 75%!

           Her friend elects to invest her $10,000 in stocks that are returning a stroong 10% per year. Let's check out her return. At the end of year one, she has $11,000. Year two brings a net value of $12,100, and the end of year three shows a value of $13,310. The fourth year figure would be $14,641, and at the end of the year, the total value of her stock investment would be $16,105.10. Not a bad investment at all. The five years have thus shown an increase of $6,105.10 on the initial $10,000, or a little over 61%, indicating an average yearly return on investment of just over 15%.

Your choice. Would you rather net an average of 75% per year, or 15% per year? Take a look at the charts below illustrating the difference, and you decide!

It is figures like these that cause an interesting statistic about average American net worth. According to an article by Lawrence Yun in this month's issure of Realtor magazine, the Federal REserve Board "finds a staggering difference in average net worth between home owners and renters: $184,400 vs $4,000! Mr. Yun is the chief economist and senior vice president of research for the National Association of Realtors, and his very insightful article is what prompted me to write this post to bring such important information before the general public. It is particularly appropriate for prospective and buyers and sellers in our Albuquerque, NM market, since we have actually continued to experience over 7% appreciation in our market even during this "slower" 2007!