First Person: My Home Was a Horrible Investment

So many of the people I know seem obsessed with figuring out whether their home purchase was a good investment. During the housing bubble, they bragged about how much their homes were worth. When the housing market crashed, they bemoaned the fact that their home was worth less than they owed on their mortgages. I'm just as curious to find out how much my home is worth, but I don't view my home as an investment anymore. I think about my home as a place to live. I also know it's less money to pay my mortgage than it is to rent a similar house. I recently found a calculator at CNNMoney that helped me determine if my home was a good investment.

Plugging in the numbers

I plugged in the fact that I bought my home in July of 2005 for \$180,000. I then went to Zillow and read that my home is worth \$122,200, according to the site. Since I recently had the home appraised for a home refinance, I went with that number. I plugged in the \$130,000 appraisal number for the calculator.

Comparing my home to stocks

The calculator compares the annual and total returns of my home to stocks and bonds. The annual return on my home was a negative 4.2 percent compared to the average U.S. home, which had an annual negative return of 3.7 percent. My total return was a negative 27.8 percent. My negative returns compared to the positive total stock returns of 5.3 percent and the positive return on bonds of 4.8 percent.

Factoring in the interest

If the calculator had factored in how much interest I paid on my mortgage loan, I would have seen an even greater loss on my so-called "investment." If I go back and plug in how much I purchased my home for including the interest I'll owe, the numbers tell a much different story. I changed the total cost to \$280,000 to include the interest. My annual return was a negative 9.5 percent. My total return stands at a negative 53.6 percent today. In order to recoup my investment, I'll need to sell my home for \$150,000 more than it's currently worth on today's market.

While my home isn't a good investment compared to stocks, I used to view it as a safer investment over the long run. If I invested the money in stocks in companies that went bankrupt, I could have lost the money, I'd tell myself. Now, I simply don't view my home as an investment at all. It's like purchasing a car, shoes or a handbag. I bought my home to use it. As it stands today, my home is a terrible investment from a financial standpoint. But I'm still happy living in it as opposed to a cardboard box.

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