The Wealth of People

Time+Money/Shelter+Life+Neighbors = HOME.

A home is the major financial asset for most families, so some wonder about its investment return. You can go to the Federal Reserve Bank of St. Louis and find out that real estate prices have been rising steadily since 2012; the Case Shiller national home price index calculates that prices are up over 2% in 2019. So -- does that mean you add 2% to the value you estimated last year? No. The cost of home ownership, in time and money, is built into that number.

The value of a home includes land, which may appreciate in a good market, and a structure of "bricks, sticks, pipes and appliances" that depreciates with daily wear and tear. To maintain, or increase, house value, the owner must keep a home in top condition and consistent with current trends (how many houses still have expensive trash compactors now used as mid-size waste cans?). If this is the way you choose to spend your free hours, great; when the time comes to sell your home, you will see some of those gains. If not, a lower sale price will be your payment for years of use.

Plus, such indices do not segregate specific benefits: 

• Neighborhood qualities such as schools and parks/community centers; 

• Fixed-rate mortgages that  keep your housing costs steady, avoiding increases that hit renters; 

• Mortgage interest/property tax deductions that reduce federal taxes (if you itemize);

• The "plus" of building equity through steady investments of time and money.

You might think of other "perks" you enjoy with your home, as well as additional expenses. To estimate total return, balance its net costs and benefits every year, not just some future potential capital gain.

Note: The photo is a single-family home in Chevy Chase, MD that sold for $1.3M in 2014