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.
| 1st Class Property Management, 620 Bypass Dr, Clearwater Fl 33764 |
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| 1st Class Real Estate, 620 Bypass Dr, Clearwater Fl 33764 |
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| Aa International Realty, 2759 S R 580 Suite 113, Clearwater Fl 33761 |
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| Aeolus, 5 Pelican Pl, Clearwater Fl 33756 |
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| Aim Realty Of Pinellas County, 1831 Audubon St, Clearwater Fl 33764 |
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| Alba Consulting Corp, 1420b Court St, Clearwater Fl 33756 |
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| Ameri-tech Realty, 24701 Us Highway 19 N Ste 102, Clearwater Fl 33763 |
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| Amorose & Associates Realty, 1531 S Highland Ave, Clearwater Fl 33756 |
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| Arbors Management & Realty, 51 S Main Ave Unit 311, Clearwater Fl 33765 |
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| Ardolino Company, 14433 62nd St N, Clearwater Fl 33760 |
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| Ark Property Solutions, 1831 N Belder Rd Suite G-3, Clearwater Fl 33765 |
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| Banks & Associates, 516 Lakeview Rd, Clearwater Fl 33756 |
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| Barefoot Realty Group, 13505 Icot Blvd Ste 203, Clearwater Fl 33760 |
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| Blake Real Estate, 2695 Sunset Point Rd, Clearwater Fl 33759 |
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| Boos Realty Company, 410 Park Place Blvd Ste 100, Clearwater Fl 33759 |
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| Bradley Properties, 2119 Ne Coachman Rd, Clearwater Fl 33765 |
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| Brandywine Homes Usa, Po Box 4292, Clearwater Fl 33758 |
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| Brandywine Real Estate, 2631 Mccormick Dr Ste 101, Clearwater Fl 33759 |
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| Brokers, Po Box 17929, Clearwater Fl 33762 |
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| Bruce Strumpf, 2120 Drew St, Clearwater Fl 33765 |
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| Bullard Realty, 2325 Ulmerton Rd Ste 20, Clearwater Fl 33762 |
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| Central Realty, 1760 W Lagoon Cir, Clearwater Fl 33765 |
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| Charles Rutenberg Realty Associates, 1545 S Belcher Rd, Clearwater Fl 33764 |
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| Charles Rutenberg Realty, 1545 S Belcher Rd, Clearwater Fl 33764 |
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| Chase Real Estate, 2451 N Mcmln Bth Rd Ste 200, Clearwater Fl 33759 |
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| Clearwater Realty, 315 Edgewood Ave, Clearwater Fl 33755 |
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| Coastal Realty Association, 805 Fairwood Forest Dr, Clearwater Fl 33759 |
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| Colliers International Tampa Bay Florida, 311 Park Place Blvd Ste 600, Clearwate More ... |
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| Collman Properties, 423 Cleveland St, Clearwater Fl 33755 |
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| Com-realestate.com, 2723 Via Capri Ste 814, Clearwater Fl 33764 |
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| Commercial Equity Group, 2471 N Mcmln Bth Rd Ste 316, Clearwater Fl 33759 |
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| Condon-meek Real Estate, 1211 Court St, Clearwater Fl 33756 |
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| Corporate Consultants, 1631 Chateau Dr, Clearwater Fl 33756 |
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| Cortland Realty Group, Po Box 15722, Clearwater Fl 33766 |
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| Cosmos Realty, 6 S Myrtle Ave, Clearwater Fl 33756 |
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| Country Club Realty, 29750 Us Highway 19 N Ste 201, Clearwater Fl 33761 |
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| Cr Commercial Realty, 1545 S Belcher Rd, Clearwater Fl 33764 |
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| Crist Realty, 2420 Enterprise Rd Ste 204, Clearwater Fl 33763 |
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| Csc Properties, 5795 Ulmerton Rd Ste 200, Clearwater Fl 33760 |
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| Davy Property Solutions, 1301 Eastfield Dr, Clearwater Fl 33764 |
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| De Boer International, Po Box 16295, Clearwater Fl 33766 |
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| Discount Realty Of Tampa Bay, 14255 Feather Sound Dr, Clearwater Fl 33762 |
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| Eckert Realty & Property Management, 1938 N Hercules Ave Ste 3, Clearwater Fl 33 More ... |
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| Edrick Properties Ii, 2430 Estancia Blvd Ste 112, Clearwater Fl 33761 |
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| Equity Pro Realty, 1130 Cleveland St Ste 286, Clearwater Fl 33755 |
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| European Equities Corporation, 2605 Enterprise Rd E Ste 150, Clearwater Fl 33759 |
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| Faust Realty, 2451 N Mcmln Bth Rd Ste 200, Clearwater Fl 33759 |
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| First Florida Business Consultants, 600 Druid Rd E, Clearwater Fl 33756 |
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| First Team Homes, 206 Flamingo Dr, Clearwater Fl 33756 |
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| Flo Lugo Realty, 1619 Jeffords St, Clearwater Fl 33756 |
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| Florida Business Group, 2561 Nursery Rd Ste A, Clearwater Fl 33764 |
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| Florida Federated Management, 563 S Duncan Ave, Clearwater Fl 33756 |
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| Florida Federated Realty, 563 S Duncan Ave, Clearwater Fl 33756 |
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| Florida Friendly Real Estate, 3201 Sandy Ridge Dr, Clearwater Fl 33761 |
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| Florida National Realty, 2909 Sweetgum Way S, Clearwater Fl 33761 |
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| Florida Real Estate Store And Property Management Services, 13575 58th St N Ste More ... |
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| Florida Real Joy, 1652 Harvard St, Clearwater Fl 33755 |
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| Florida Vacation Properties, Po Box 3754, Clearwater Fl 33755 |
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| Floridian Trust, 600 Bypass Dr Ste 100, Clearwater Fl 33764 |
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| Flynn Management Corporation, 516 Lakeview Rd Ste 8, Clearwater Fl 33756 |
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| Foxx And Associates, 601 Cleveland St Ste 501, Clearwater Fl 33755 |
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| Franchise Equity Groiup, 2605 Enterprise Rd E Ste 300, Clearwater Fl 33759 |
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| Franterra Real Estate, 2841 Executive Dr Ste 100, Clearwater Fl 33762 |
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| G A Nichols Company, 2271 Belleair Rd, Clearwater Fl 33764 |
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| Gentile Group, 28059 Us Highway 19 N Ste 302, Clearwater Fl 33761 |
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| Gentile Residential Realty, 28059 Us Highway 19 N, Clearwater Fl 33761 |
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| Good Living Properties, 500 N Osceola Ave, Clearwater Fl 33755 |
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| Grand Capital Advisors, 3000 Gulf To Bay Blvd Ste 200, Clearwater Fl 33759 |
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| Great Homes Realty, 416 Laura St, Clearwater Fl 33755 |
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| Greene Canfield De George, 2074 Weaver Park Dr, Clearwater Fl 33765 |
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| Greene Canfield De George Ltd, 2074 Weaver Park Dr, Clearwater Fl 33765 |
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| Greene Investments, 29180 Us Highway 19 N, Clearwater Fl 33761 |
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| Greyhound Investments, 4500 140th Ave N Ste 209, Clearwater Fl 33762 |
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| Gulfcoast Properties, 1734 Faulds Rd S, Clearwater Fl 33756 |
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| Gull Aire Realty, 2420 Enterprise Rd Ste 105, Clearwater Fl 33763 |
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| Hallmark Realty Of Florida, 4500 140th Ave N Ste 101, Clearwater Fl 33762 |
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| Harris & Company, 3005 State Road 590 Ste 200, Clearwater Fl 33759 |
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| Harris Properties Of Clearwater, 3005 State Road 590 Ste 200, Clearwater Fl 3375 More ... |
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| Hayes & Associates Realty, 14141 46th St N Ste 1201, Clearwater Fl 33762 |
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| High Point Realty, 413 Cleveland St, Clearwater Fl 33755 |
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| Home Buyers Realty, 2664 N Mcmln Bth Rd Apt 611, Clearwater Fl 33761 |
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| Hometrust Beachside Realty, 2420 Enterprise Rd Ste 200, Clearwater Fl 33763 |
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| Housemart Realty, 1633 S Missouri Ave, Clearwater Fl 33756 |
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| Hupp Realty Advisors, 907 S Ft Harisn Ave Ste 102, Clearwater Fl 33756 |
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| Imperial Estates Realty, 107 N Mcmullen Booth Rd, Clearwater Fl 33759 |
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| Imperium Real Estate Services, Po Box 15103, Clearwater Fl 33766 |
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| Insite Real Estate, 714 Grand Central St, Clearwater Fl 33756 |
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| Int'l Realty, 700 Cleveland St, Clearwater Fl 33755 |
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| Interactive Brokerage Group, 2583 Splitwood Way, Clearwater Fl 33761 |
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| International Realty Plus, 2274 State Road 580 Ste B, Clearwater Fl 33763 |
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| J B Management, 300 S Duncan Ave Ste 275, Clearwater Fl 33755 |
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| J Long Realty Group, 100 Oakmont Ln Apt 410, Clearwater Fl 33756 |
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| James Millspaugh & Associates, 110 Turner St, Clearwater Fl 33756 |
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| Jemme Properties, 2430 Estancia Blvd Ste 112, Clearwater Fl 33761 |
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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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