Long term investment: Stocks vs Oahu real estate
Posted by Tony Kawaguchi, RA on Monday, June 13th, 2011 at 8:48pm.How did your money do over the last 5 and 10 years? Was housing a terrible investment? Which did better, stocks or real estate?
Well look back to 5 years go and say you had chosen to invest in stocks. If you had $50,000 in (June 2006,) and you had invested in the Dow, you would currently have about $54,870, an increase of 9.7%. 
If you had invested that same $50k 10 years ago in the same Dow stocks, you would have about $54,445, an 8.9% increase. Basically, any money that you had in the stock market over the last 5 years or 10 years is worth less when you include inflation. By the way, I have been calling high inflation for about 2 years now, just following most economists.
Now let's say you had invested in Oahu real estate.
In June 2001, the median price of Oahu homes was about $300,000. If you had used that $50k as a down payment on real estate, the value of your house would have gained approximately $300,000, and you would have paid your mortgage down to about $206,000 over those 10 years.
Fast forward to May of this year, and the median sale price on Oahu in May was $595,000. Your $50k down payment is now worth about $400,000.
Now what about the last 5 years? Didn't the real estate market collapse? Not so fast...
The median price of Oahu real estate 5 years ago was $600,000, almost exactly the same as it is now. And your $550,000 loan would have a current balance of $507,500. So guess what?
Your $50,000 is now worth about $92,500. Plus, you received tax write offs on the interest payments that whole time. Had you invested that $50k and rented a house for the last 5 years, you would have... nothing.
Going forward - with rising inflation, a questionable economy, and faltering stocks, if you buy a house, you have something. You have a house.
With stocks, 10 years may go by and you may not have anything more than what you invested, and you might even have less.
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It's good to see some real estate market is doing good hopefully the rest of the nation will rise to the same level.
Posted on Wednesday, June 15th, 2011 at 4:53 PM.