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Low Inventory, Higher Prices

For a while now, we have not had as many homes for sale on the market as we normally do. It has in the past several years gotten even worse. While current buyers are keenly aware of the fact that not much is available to them at this time in certain price points, they also know something else. Prices are rising. 

Its a simple microeconomics issue. Low inventory puts upward stress on prices. In the area I work, prices have been rising about 5+% per year. Not a bad return on investment when compared to the savings rates banks are paying out. 

Will this situation continue forever? I doubt it. Historically, though, over the past 80 years, real estate has averaged around 4% increases per year. Combine this with Government tax incentives and we have a built in wealth generator. 

What about property taxes, maintenance costs, upgrade costs? Yes, they all eat into your Return on your Investment, but in my mind, it is still head and shoulders above paying out rent every month that does not create personal wealth, and subject to yearly increases. 

Long story short, owning a home can be a terrific personal wealth builder.