For those wanting a steady return on their money, houses can be a fairly safe bet. When the baby boomers started madly buying houses in the 1980s, suddenly real estate seemed like the path to instant wealth. The real estate markets fluctuate constantly. There have been times when house prices have gone down. However if you look at the overall price of homes in your area over the last 10 years, in most cases, (depending on your region) prices have risen. Until the Fall of 2008. In Toronto the average house price has fallen about 10%. As bad as that is - compared to the 40+/-% decrease in the stock market - real estate is still considered quite safe.

Where is the housing market headed? Nobody can accurately predict. Have we hit bottom? Unfortunately - we don't know if we have hit bottom until we are on our way back up and we look backwards. Many economists are forecasting that the bottom is near. They are also predicting 2-5 years to have the prices return to their previous high.

A home isn't a true investment in that you actually get the benefit of using it, so for most people there is a strong emotional attachment to the house. So regardless whether it increases or decreases - there is the fact that it gives you a place to live and build memories.

Even if house prices don't rise phenomenally, a home has two strong things going for it as an investment. First, any capital gains on your principal residence are tax-free. If your house appreciates by 6 per cent, you get to keep every cent of your gains.

Now 6 per cent may not sound like much, but in terms of how much you end up with, you'd have to earn as much as 12 per cent on a fixed-income investment such as a GIC to match that return, after tax.
Second, you don't have to come up with the full purchase price, meaning you're able to harness leverage. The conventional mortgages require a down payment of 25 per cent of a house's appraised value. Where as the High Ratio Mortgage, requires only 5% down payment.

For example, if you buy a $200,000 home, you need to come up with around $50,000 for a conventional mortgage. If the home's value rises to $220,000, that's an increase of 10 per cent. But what's really happened is you've put up $50,000, and made $20,000. Your real gross return on your invested funds is around 40 per cent. But notice the word “gross”. Don't forget that your real return will be less.
Buying a home and having a mortgage is also a tremendously powerful forced savings program.