More on the Numbers ....

Last week I compared the gains for the stock market and housing over the past 20 years. The moral of the story was that numbers can be deceiving in the short-run, but in the long-run, the gains are easy to see. However, one may look at the fact that the Dow is up 400% over twenty years and house prices up 120% over twenty years and conclude that their money should go into the stock market. That was not intended to be my message. For one, a home is more than an investment, it is your home. Secondly, the numbers presented do not take into account the investments requirement to purchase the asset. For example, stocks may cost 100% of their value. Even if you are able to purchase stocks "on margin," they would still likely cost at least 50% of the value.

Homes may be able to be purchased for as little as 3.5% to 10% down. Therefore, the return on money invested may actually be greater with regard to housing -- especially considering the tax deduction on mortgage interest and the fact that you are replacing rental expense. I am not saying that housing is a better investment than stocks. I'm only again making the point that the numbers can be deceiving. In this case 400% to 120% is not an "apples-to-apples" comparison. Speaking of numbers, the employment report released on Friday was pretty interesting. The number of jobs created was much less than expected. One bad month does not derail a recovery, but does mean that the increase in the stock market and rates may have gone a bit too far too fast. Stocks did not retract that much, but rates have again moved lower. This creates another opportunity -- perhaps temporary -- for those who are purchasing or refinancing real estate.

Mike Ervin

Senior Mortgage Banker

California Retail Division

(650) 735-5261

mike@mikeervin.com

NMLS # 282715