Recently, my husband relayed a conversation he overheard at the office where someone was saying that home ownership is not a smart or important investment anymore. Since I have also heard these sort of rumblings lately, I feel compelled to write about it.
The idea I have heard debated is that houses will never appreciate at the rate they traditionally have before and that these days it is better to rent. My response to this ideology is why would you want to help make someone else wealthier (your landlord) when you could help yourself instead?
In Somerset and Hunterdon Counties, the monthly cost of renting is often very comparable to a monthly mortgage payment to purchase a similar property. This coupled with the tax benefits of home ownership, make it financially worthwhile to own. Why not build your own equity in a home rather than build equity for the landlord? In addition, if your timing is right, you can do one better.
In real estate, like most things, timing is everything. If you are fortunate to buy when prices are lower and hold the property until housing prices in the area have risen, you have the opportunity to make a profit when you sell.
For example, incredibly low interest rates continue to make home ownership more affordable than in years past and there is presently a low inventory of houses on the market. With the combination of people who can afford to buy and the presence of more buyers than sellers on the market, house prices continue to increase. Certainly, home ownership is paying off for those looking to sell now. When you rent a property, you do not have the opportunity to take advantage of such market trends.
Yet another advantage for homeowners over renters is that homeowners have the opportunity to pay off a mortgage and own a home outright, whereas renters will always have an on-going monthly expense which will likely rise with the rate of inflation. Lastly, with fewer companies offering pension plans and social security due to become absent for future generations, one’s home can also act as a nest egg for retirement. For all these reasons, as well as non-monetary benefits, home ownership is still a very significant and smart investment.
Fortunately, not everyone is down on home ownership these days. According to a recent survey by JP Morgan Chase, 87 percent of Americans said that they dream about owning a home. What’s more, 66 percent of those surveyed feel homeownership is a good financial investment and 75 percent say it is an integral part of raising a family. The survey results also showed that first-time buyers are more confident about being able to achieve the dream of homeownership. When compared to previous survey results from six months ago, the number of potential first-time buyers who said they were optimistic about being able to put money down on a home over the next six months doubled.
This optimism reflects the reality that if you can afford a down payment and plan to stay in one location for a number of years, home ownership still beats renting.