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As a fairly general rule, homes appreciate about four or five percent a year. Some years will be more, some less. The figure will vary from neighborhood to neighborhood, and region to region.
Five percent may not seem like that much at first. Stocks (at times) appreciate much more, and you could easily earn over the same return with a very safe investment in treasury bills or bonds.
Presumably, if you bought a $200,000
house, you did not pay cash for the Las Vegas home.
You got a Las Vegas mortgage, too. Suppose you put as
much as twenty percent down - that would be an investment
of $40,000.
At an appreciation rate of 5% annually, a $200,000 home would increase in value $10,000 during the first year. That means you earned $10,000 with an investment of $40,000. Your annual "return on investment" would be a whopping twenty-five percent.
Of course, you are making Las vegas
mortgage payments and paying property taxes, along with
a couple of other costs. However, since the interest
on your Las Vegas mortgage and your property taxes are
both tax deductible, the government is essentially subsidizing
your Las Vegas home purchase.
Your rate of return when buying a Las
Vegas home is higher than most any other investment
you could make.
 There are times when the economy is brisk and everyone feels confident about his or her prospects for the future. As a result, they spend money. People eat out more, buy new cars, and...They buy houses.Then, for one reason or another, the economy slows down. Companies lay off employees and consumers are more careful about where they spend money, perhaps saving more than usual. As a result, the economy decelerates even further. If it slows enough, we have a recession.
During such a time, fewer people are
buying Las Vegas homes. Even so, some homeowners find
themselves in a situation where they must sell. Families
grow beyond the capacity of the Las Vegas home, employees
get relocated, and some may even find themselves unable
to make their Las Vegas mortgage payment - perhaps because
of a layoff in the family.
When the supply of available Las Vegas
houses is greater than the supply of buyers, appreciation
may slow and prices may even fall, as happened in the
early eighties and the early to mid-nineties.
If you are lucky enough to purchase
a Las Vegas home during a slow period, you can be reasonably
certain the economy will begin to show strength again.
At times, Las Vegas real estate values may even surge
drastically. In many regions of the country, this is
precisely what occurred in the late eighties and nineties.
One problem with attempting to time
your purchase to the business cycle is
that no one can accurately predict the future. Another
challenge is that interest rates are generally higher
during a depressed market and income may not be keeping
up because less overtime is available and bonuses or
commissions are down. With higher interest rates and
lower earnings, fewer people can qualify for a Las Vegas
home purchase than in more prosperous times.
Plus, "timing the market" generally
works best for first-time buyers. People who already have
a Las Vegas home usually need to sell it in order to buy
their next one. If a "move-up" buyer wants to
buy a home during a depressed market, that means they
usually have to sell one during the slow market, too.
If a seller wants to sell his Las Vegas home to take advantage
of a "hot" market when prices are fairly high,
they generally have to buy their next home during that
same hot market.It tends to equal out. Finally, the business
cycle can change over time. Since 1983, we have had two
fairly long expansions with only a slight recession in
between each. You would not want to wait nine years to
buy a home, would you? You could miss out on a substantial
amount of appreciation by waiting, and end up paying much
higher prices.As you read and study about buying Las Vegas
real estate, you will often find the words "house"
and "home" used interchangeably. There is a
huge difference between a house and a home. A house can
be a place to eat, sleep, park your car, and put all your
"stuff" (including other family members). It
is a material possession and an investment. A home is
where you feel comfortable, warm, safe, and protected.
A home is where you live.
A house is something you buy logically.
A home is an emotional purchase. When buying real estate
you have to balance your emotional wants and your logical
needs because there will almost certainly be a time
when the two conflict.
For example, you may want a Las Vegas
house with a view, but the payment is higher than you
feel comfortable with on a thirty-year fixed rate mortgage.What
do you do? Purchase the Las Vegas house anyway and budget
more carefully for the next few years? Buy the same
Las Vegas house without the view and get it cheaper?
Make a larger down payment by borrowing from your 401K
or family members, so you get a lower payment? Get an
adjustable rate mortgage with a smaller payment instead
of a fixed rate loan? Or buy a smaller Las Vegas house
and still get the view?
When viewing the Las Vegas house, most
people look at it emotionally and envision it as a safe,
happy, comfortable home. Later, when making the offer
or filling out a Las Vegas mortgage application, your
logic may begin to kick in, instead.
The trick in buying Las Vegas real
estate is to view all decisions with both a logical
perspective and an emotional perspective. If a situation
presents itself that requires a trade-off, decide on
whether there is a huge conflict or a small one. Logic
should win the big conflicts, but emotion should always
be a factor, even winning the small ones.
You will find yourself owning a warm, happy, safe home - and an investment for the future at a price you are willing to pay.
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