The stock market's fall is the real estate industry's gain. Why? Because the home offers a more stable return on investment, according to industry spokespersons.

As investors continue to reel from the month-long plunge of the American, Russian and Asian stock markets, they may well ask themselves where their money can safely be invested. How about right in their own backyards? Literally! The real estate industry can only reply to investors' questions with the same answer that they have heard from their own stock brokers. The "stock" answer is - there are no guarantees.

However, like stocks, the real estate transaction does leave a track record, or performance record, if you will. By calculating the amount that homes have appreciated in the area over the last year, and going back to home records over several years, you can calculate and show your buyer or a seller the potential investment value of a home. For your buyers, you can help them figure the costs of the loan, multiplied by the potential gain, based on the sales track record for homes in their target area. You can even give them an ideal time to resell the home. Meanwhile, mark your own farming calendar to give them a call.

For your sellers, you can do the same. Ask them what they paid for the home, figure how long they have lived in the home versus the appreciation of the home for the same period, and include the costs of improvements they have made on the home, and you can give them the return on their home investment. But before you encourage speculation, remember that like the stock market, real estate is a long-term investment, with those planning to jump in and jump out the most likely to be hurt in a shortfall. As the stock market rocks, investors are being told to hang onto the side of the boat, and not to bail out. Any investment you pull out of at a loss cannot be recouped. Offering less dramatic returns on investment, but substantial gains nonetheless, the home is a working investment. Not only does the home provide shelter, it also provides financial shelter.

According to the National Association of REALTORS, real estate can offer handsome gains on initial investments due to the fact that the industry is relatively unaffected by the ups and downs of the volatile stock market. In the light of the stock market's tremendous returns on investment over the last seven years, the relatively modest gains made by residential properties have kept them from being taken seriously by investors as viable places to balance an investment portfolio, but recent gains in the real estate market may be making the home as an investment a more attractive alternative for some investors.

The formula for success, however, is not based just on the purchase and sales price, but includes the amount leveraged. NAR President R. Layne Morrill says, "Housing is not a quick-in, quick-out investment. However, when purchased for the long term, housing is one of the safest investments a consumer can make. In addition to the savings accumulated through a buildup of equity and the tax advantages, a home provides shelter."

According to the latest "State of the Nation's Housing" report from Harvard University's Joint Center for Housing Studies, there is a substantial increase in the rate of return on housing the longer it is held. The report suggests that a homeowner whose home appreciates at the rate of 5 percent a year, and who contributed a down payment of 10 percent will typically receive an impressive 94 percent return after owning the residence just three years when it comes time to sell.

That is not a bad return, and especially since the bank's money helped make the investment. Consumers can get more exact returns on investment by factoring in such variables as moving costs, repairs, and loan costs. To move again sooner than three years may mean that a significant portion of the home's appreciation is eaten by the costs of relocation.

Interestingly, that figure may change as the home (and the investment) ages toward the ten-year mark. Repair and maintenance costs then significantly reduce the return on investment if the home is maintained to market standards. However, appreciation should still cover the costs of home improvements.

Published: September 9, 1998

Use of this article without permission is a violation of federal copyright laws.

Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.