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August 21st, 2009 5:50 AM
92% Say Home is Good Investment

Reported by Sheyna Steiner, Bankrate.com

The financial publishing web site Bankrate.com recently commissioned Princeton Survey Research Associates International to gauge the attitudes of Americans about finances and family life and discovered several surprises.
"American families are stricken by fear about finances, but not enough to change their savings behavior,"reports Bankrate.

The markets have shaken people's faith in certain bedrock financial principles, but the American dream of homeownership remains alive and well.

Among the survey findings: About nine out of 10 (92 percent) survey respondents believe that a home is a good investment for the future. Four out of 10 Americans (39 percent) don't believe the stock market offers the best chance for long-term returns, but 49 percent do have faith in the market.

Preferring homes as investments as contrasted to the stock market seems off base, given each of their respective historical returns. A study to be published this fall in the Journal of Portfolio Management found that in the last three decades, the average annual return on residential real estate was 5.92 percent versus 12.33 percent for the stock market, as measured by the Standard & Poor's 500.

"Over time, the stock market is more liquid with a higher rate of return, but in the short term much more volatile," says Jack Clark Francis, professor of finance and economics at Baruch College and a co-author of the study called Contrasting Real Estate with Comparable Investments, 1978-2008.

"In the past 10 years, many investors have been burned by the stock market twice and have been scared out of equities as a result," he says.

Yet why do so many Americans believe that homes are good investments, despite the hits taken lately by the real estate market?

"Most people are not selling their homes, so they don't see the possible illiquidity that is in the market or any of the negatives that are on that side," says Jeffrey D'Italia, senior financial professional at Firstrust Financial Resources. Also, people track their investments more closely than they follow the value of their home.

"Houses are homes first and investments a distant second," offered Bankrate's Senior Financial Analyst Greg McBride.

"Even then, housing is a long-term investment and not a get-rich-quick scheme. What makes homeownership attractive is that over time it can rebate some of the costs, unlike renting," stated McBride.

Survey interviews were conducted from July 16 to July 19, 2009, under the direction of Princeton Survey Research Associates International.

Link: Financial Attitudes
Posted by Customer Service on August 21st, 2009 5:50 AMPost a Comment (0)
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