For a long time, conventional wisdom seemed to be that you grow up and buy a home because that’s just what you do. But lately, people are realizing that it isn’t always the smartest financial move. Obviously, the housing crisis has a lot to do with that—it’s made people question the standard assumption that homeownership equals financial stability.
Homeownership isn’t a good or bad idea on its own. It has everything to do with your own situation. Sometimes, buying a home is the smart thing to do; other times, it really isn’t. Whether or not it’s smart for you will depend on a few different factors. Here’s what you should keep in mind.
The biggest argument for owning a home is that it’s an “investment.” But a lot of people tend to overestimate the return on this investment.
People tend to believe that homes are appreciating assets, but this isn’t always true. Overall, the housing market doesn’t have a great long-term return. It barely outpaces inflation, in fact.
| American Realty Associates, 10184 Hernando Ridge Rd, Brooksville Fl 34613 |
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| Ashton Realty Group, 14196 Missouri Skylark Rd, Brooksville Fl 34614 |
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| Castle Dream Real Estate, 15449 Burbank Dr, Brooksville Fl 34604 |
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| Dave Hill Real Estate, 31089 Cortez Blvd, Brooksville Fl 34602 |
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| Elgin Corp, 26245 Atlantis Ln, Brooksville Fl 34601 |
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| Florida Blue Realty, 13339 Cortez Blvd, Brooksville Fl 34613 |
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| Florida Home Specialists Pa, 15384 Dreams Begin Ln, Brooksville Fl 34604 |
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| Gavish Properties & Investments, 26243 Pine Hill Dr, Brooksville Fl 34601 |
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| Glen Lakes Developments, 9000 Glen Lakes Blvd, Brooksville Fl 34613 |
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| Glen Lakes Partnership Ltd, 9000 Glen Lakes Blvd, Brooksville Fl 34613 |
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| Glen Lakes Realty, 9000 Glen Lakes Blvd, Brooksville Fl 34613 |
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| Global Commercial Real Estate Services, 2142 Virginia Lee Cir, Brooksville Fl 34 More ... |
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| Gold Star Realty Group, 7244 Brookridge Central Blvd, Brooksville Fl 34613 |
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| Greater Tampa Bay Real Estate Services, 939 Candlelight Blvd, Brooksville Fl 346 More ... |
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| Hedden Real Estate, 203 W Jefferson St, Brooksville Fl 34601 |
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| Home Land Real Estate, 13169 Jacqueline Rd Ste 7, Brooksville Fl 34613 |
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| Hometrust Advantage Realty, 13099 Saddle Way, Brooksville Fl 34614 |
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| James Eckart Real Estate, 10288 Beggs Ln, Brooksville Fl 34601 |
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| Killingsworth Agency, 19259 Cortez Blvd, Brooksville Fl 34601 |
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| Market Street Real Estate Services, 10000 Cortez Blvd, Brooksville Fl 34613 |
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| Montgomerys Realty Services & Management, 11202 Humber Rd, Brooksville Fl 34614 |
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| Pearson Corp, 1134 W Jefferson St, Brooksville Fl 34601 |
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| Pearson Referral Executives, 1134 W Jefferson St, Brooksville Fl 34601 |
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| Pinnacle Property Solutions, 7281 Sunshine Grove Rd Ste 123, Brooksville Fl 3461 More ... |
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| Preferred Property Associates, Po Box 566, Brooksville Fl 34605 |
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| Preferred Property Associates, 1188 S Broad St, Brooksville Fl 34601 |
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| Preferred Property Referrals, Po Box 566, Brooksville Fl 34605 |
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| Rai Realty Associates, 460 Hancock Lake Rd, Brooksville Fl 34602 |
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| Real Estate Florida Group, 10495 Calico Warbler Ave, Brooksville Fl 34613 |
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| Real Estate Florida Group, 7268 Brookridge Central Blvd, Brooksville Fl 34613 |
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| Robert A Buckner & Associates, 11 N Main St, Brooksville Fl 34601 |
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| Ryder Real Estate & Referrals, 20371 Cortez Blvd, Brooksville Fl 34601 |
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| Save On Real Estate, 15491 Cortez Blvd, Brooksville Fl 34613 |
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| Southern Coast To Country Realty, 19211 Cortez Blvd, Brooksville Fl 34601 |
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| Southern Coast To Country Referrals, 19211 Cortez Blvd, Brooksville Fl 34601 |
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| Southland Properties Group, 11117 Golden Eagle Ave, Brooksville Fl 34613 |
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| Spirit Realty Of Florida, 9700 Critter Ln, Brooksville Fl 34601 |
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| Tommie Dawson Realty, 675 Ponce De Leon Blvd, Brooksville Fl 34601 |
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| Tommie Dawson Referral Services, 675 Ponce De Leon Blvd, Brooksville Fl 34601 |
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| Veritas Ventures, 15269 Brice Dr, Brooksville Fl 34601 |
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| Welchert Realtors Land And Home, 20375 Cortez Blvd, Brooksville Fl 34601 |
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| White Diamond Realty, 9157 Commercial Way, Brooksville Fl 34613 |
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| White Diamond Rentals, 9157 Commercial Way, Brooksville Fl 34613 |
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| Zips Real Estate, 11738 Broad St, Brooksville Fl 34601 |
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Over the past 100 years, home prices have only grown at a compound annual rate of 0.3%, adjusted for inflation. The S&P 500, on the other hand, has had an annual return of 6.5%. That’s a big difference.
While that single real estate asset might help protect you against inflation, a well-balanced stock and bond portfolio seems to be a better investment. But a lot of people’s portfolios are mostly made up of their home value. You wouldn’t put 80 percent of your portfolio in a bond simply to protect against inflation (unless maybe you were nearing retirement) so why would your home make up that same amount? That’s the argument against buying a home as investment.
When making the decision it is important to understand that buying a home might not be a great financial investment and to not forgo all of your investable assets in order to purchase a home because you are really purchasing a right to housing and not a long-term investment designed to generate income.
Most experts agree that while housing is an investment, it’s not a great investment. So if this is your only basis for buying a home, it’s probably not the best one.
Decide How Much You Can Afford: In deciding whether you can afford to buy, you’ll have to figure out how much home you’re planning on buying in the first place. One rule of thumb for figuring out this number: your home should cost no more than 2.5 times your salary. Of course, this just gives you a ballpark figure. It doesn’t consider your net worth.
Weigh the Opportunity Cost of Renting Versus Buying: While your home might not be the best investment, in the end, it’s still yours. Even if it barely outpaces inflation, at the end of the day, you own it, and that’s worth something. When you rent, you own nothing—the money is given to someone else. So lots of people argue that you should own a home because one day, you’ll pay that home off and it’ll be yours, rather than continuing to pay rent for the rest of your life.
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