Newspaper article THE JOURNAL RECORD

Homes vs. Stocks: Where Should Your Money Really Be?

Newspaper article THE JOURNAL RECORD

Homes vs. Stocks: Where Should Your Money Really Be?

Article excerpt

NEW YORK -- Speaking of investments, have you checked the prices of homes recently? You haven't? Too busy counting your paper gains in stocks perhaps.

Here are some details worth pondering:

In 1994, the median price of an existing single-family home was $109,900. Prices varied by region, but for the purpose of measuring investment performance the national median is used.

By 1995, the median price had risen to $113,100, and by 1996 it had jumped to $118,200. This year's increase is more substantial -- to $127,200 in June, about a 7 percent rise over last June.

Just 7 percent, you say? And you boast that you have a 15 percent gain in a certain stock that you, with unique wisdom and courage, bought against the advice of your broker and your spouse.

Hold on a minute. Let's deduct your broker's commission on that purchase. And let's see what you have left when you sell it and pay the capital gains tax. That is, if it hasn't tanked.

You probably have no intention of selling the house, but just suppose you did. You'd likely keep all that appreciation -- pay not a cent on capital gains. Single people get a one-time $250,000 exemption, couples $500,000, from capital gains taxes.

Meanwhile, you and your family are living in that house. Compare that with the stock certificate sitting in your safe deposit box. That is, if you even received a certificate.

Consider this too: You've got a hefty mortgage but the entire price increase is yours. Oh, you say, you also bought the stock on borrowed money? OK, but your mortgage interest is tax deductible.

Meanwhile, if you accept Uncle Sam's logic, your home ownership makes you wealthier than you realize. Your income, according to the Treasury, is enhanced by the imputed rental value of your premises.

You don't understand? Most people don't, and for good reason. Anyway, in determining your wealth the Treasury assumes that were you to rent the premises your income would be enhanced. …

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