Here are the reasons why....

1. A Solid Investment

Potential for consistent, reliable appreciation is a very important consideration for any investment, and on this point, a new home is a winner. 

Unlike riskier investments, which can become worthless virtually overnight, homes generally increase steadily in value. And over time, the return can be substantial. For example, a new home purchased for $48,800 (the median for new homes) in 1977 was worth $105,707 two decades later in 1997. Assuming that the value continued to increase at the same rate, the house would be worth $264,844 in 2007. (This example is based on national conditions in individual housing markets may vary considerably.)

Compared to other investments, such as stocks, a home is a relatively stable investment. It probably will not earn the spectacular returns sometimes generated by other financial vehicles, but is also unlikely to show the dramatic declines that are often associated with other investments. Homes tend to increase in value at a steady, relatively slow pace while alternatives can be extremely volatile.

2. Owning Versus Renting

Purchasing a home can provide greater returns than renting and putting money in alternative investments.

Two identical families have $16,800 to invest. One family uses the money for a down payment on a $140,000 single-family home and the other invests in stocks while renting a comparable single-family home at an initial rent of $750/month.

At the end of 10 years, the family that invested in homeownership is $34,660 richer than the family that invested in stocks. The home owner's net return on his $16,800 investment is $66,556. The renter's net return is $31,896. Furthermore, the home owner has paid about $5,000 less for housing than the renter over the 10-year period. Again, this example is based on national statistics reflecting the past 10 years; individual markets can vary considerably.

3. Tax Benefits: For Home Owners Only

Unique tax benefits that apply only to housing have made it stand out for decades in a field crowded with alternative investments. And under the tax code changes enacted in 1997, homeownership fares even better. Both mortgage interest and property taxes remain deductible, and profits of up to $500,000 on the sale of a principal residence are excluded from tax on capital gains. In sharp contrast, stock dividends are subject to income tax, and profits on the sale of stocks, bonds and other investments  are subject to a 20% federal tax rate for most investors. Furthermore, owning a home provides a valuable place to live. No other investment can match that.

4. The magic of Leveraging

Another benefit to homeownership is leveraging. A buyer can purchase a home with a cash down payment that is only a small fraction-as little as 10% or less-of the total purchase price. This is called leveraging an investment, and it makes the rate of return on a home much greater than on an equivalent investment where the buyer must put up the entire purchase price.

For instance, if a buyer makes a down payment of $10,000 on a $100,000 home and the home's value increase to $105,000 during the first year of ownership, then the home owner's equity (the value of the home minus any mortgage debt) has increased from $10,000 to $15,000. That's a 50% increase in equity in just one year.

5. Building Personal Wealth

For most Americans, homeownership is a fundamental first step toward accumulating personal wealth, and is the primary source of a household's net worth. In 1993, home equity accounted for 44% of the nation's total net worth-far more than any other investments, including retirement accounts, stock and mutual fund shares, savings bonds, rental property and other financial accounts.

Information provided by the National Association of Home Builders (NAHB)

Beware of Non-Licensed Builders/Remodelers

...There are State laws, which mandate Commercial building and remodeling as a State Law which mandates the licensing of residential home builders and remodelers. The consumer need protection, since a new business and/or home are the most important investments a person will make in his/her lifetime.

...State Law requires any builder or superintendent to have a residential builders license if the home is in excess of $50,000 or any person engaging in remodeling in excess of $10,000 to have a residential builders or remodelers license. State Law requires any person engaging in commercial construction or construction management in excess of $100,000 privately funded or $50,000 publicly funded to obtain a Certificate of Responsibility.

...Beware when your builder/remodeler tells you he/she does not a license as long as YOU pull the permit. This makes you the general contractor and, as such, responsible and personally liable for accidents on the job. If a person is injured while working on your home, you will not only be sued but will most likely lose. In short, professional and responsible builders and remodelers are licensed both in the municipality they are working as well as with the State. Also, make sure your contractor carries liability insurance because most homeowner's policies WILL NOT cover construction work.

Information from the Mississippi State Board of Contractors
   215 Woodline Drive, Suite B,  Jackson, Mississippi   39232
   www.msboc.state.ms.us
      800-880-6161