It may seem strange during this time when all we hear is "Buyers market" to call real estate the Greatest Investment. But it has been and will continue to be the best tool used by most Americans to build wealth. There are two primary reasons why we rate this as the greatest investment.
Home and Investment
Real estate is one of few consumer products that doubles as an investment. It is an investment that has utility. You can live in it or rent it out. Shelter is a basic need - we all have to live somewhere. It has a usage, or rental value. And as rents rise over time, the usage value increases.
A large portion of your cost is for using the property, making your actual investment cost small. Over time, rents will rise faster than your payment and the home's rental value will exceed the payment. At this point, your home investment will be making (saving) you money even before you sell.
The Federal Reserve
The Federal Reserve is our banking system and has the authority to create money, manipulate interest rates and thus control our money supply. By using these tools, they can create an economic expansion, increasing inflation, or a recession, reducing inflation. We think of them as the inflation fighters and they are, but their task could more accurately be described as keeping prices stable. They actually want a small amount of inflation, but not too much. Slow steady money supply growth, leading to low level inflation is necessary to grow the economy. The growth is especially imperative now since we (government and individuals) are deep in debt. As a result, the Fed must continue to engineer a low level inflation for decades to come.
Inflation means the cost of real estate and everything else will continue to rise over time. Real estate can rise (appreciate) faster than overall inflation as it did during the boom, or slower, and it can even go down. But over the long term it will always go up. When you buy, you lock in your payment or cost, based on the price at that time. Over time, as you build equity paying down your mortgage, the rental value of your home and the resale value will go up because of inflation.
Real estate is land, which always holds value, unlike a stock or bond which is a piece of paper. It is the "American Dream". Like food and clothing, it is a basic necessity. People immigrate here to get jobs and buy real estate. People refuse to leave their homes in the face of hurricane, floods and great danger. Their home is that valuable.
There are other investments that do better than real estate at certain points of time. But in the long term, very few can match real estate as an investment. And since it's the most widely used wealth building tool, we call it "The Greatest Investment".
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