Even in this low inflation environment, today’s dollar loses purchasing power because of inflation. Over the past century, the inflation rate has averaged about 3.5% annually. So, investments delivering a 1% to 3% return earned no future purchasing power. Instead, wealth was actually lost because inflation outpaced the rate of return.
On the other hand, past trends show that real estate has appreciated an average rate between 4% and 6% a year, beating the inflation rate.
Plus real estate has the benefit of leverage. For example, with an $80,000 down payment on a $400,000 home, if the home appreciates 4% in one year, there’s a gain of $16,000. And that means a 20% return on the down payment of $80,000.