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.
| A D C Florida Investments, 1121 Crandon Blvd Apt F205, Key Biscayne Fl 33149 |
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| Arex Realty, 77 Harbor Dr # 30, Key Biscayne Fl 33149 |
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| Ashton Real Estate, 300 Harbor Dr, Key Biscayne Fl 33149 |
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| Bbm Realty, 188 W Mashta Dr, Key Biscayne Fl 33149 |
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| Blb Realty, 115 Harbor Dr, Key Biscayne Fl 33149 |
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| Building Block Realty, 219 E Enid Dr, Key Biscayne Fl 33149 |
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| Capital International Realty, 660 Curtiswood Dr, Key Biscayne Fl 33149 |
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| Centeno International Realty, 200 Crandon Blvd Ste 322, Key Biscayne Fl 33149 |
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| Circle Commercial Realty, 650 Allendale Rd, Key Biscayne Fl 33149 |
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| Commodore Realty, 30 W Mashta Dr Ste 400, Key Biscayne Fl 33149 |
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| Corporate Real Estate Solutions, 260 Crandon Blvd Ste 32, Key Biscayne Fl 33149 |
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| D1 Realty, Po Box 490469, Key Biscayne Fl 33149 |
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| Douglas Holdings, 260 Crandon Blvd Ste 26, Key Biscayne Fl 33149 |
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| Duncan Studio Real Estate Division, 200 Crandon Blvd Ste 107, Key Biscayne Fl 33 More ... |
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| E Realty International, 260 Crandon Blvd Apt 49, Key Biscayne Fl 33149 |
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| Echarte Morini Realty, 104 Crandon Blvd Ste 306, Key Biscayne Fl 33149 |
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| Erd Investments, 1111 Crandon Blvd Apt B1008, Key Biscayne Fl 33149 |
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| Florida Brokers International Realty, 789 Crandon Blvd Ste 804, Key Biscayne Fl More ... |
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| Fortune International Realty Aventura, 500 Bay Ln, Key Biscayne Fl 33149 |
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| Fortune International Realty Key Biscayne, 260 Crandon Blvd Ste 25, Key Biscayne More ... |
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| Fortune International Realty Key Biscayne, 328 Crandon Blvd Ste 105, Key Biscayn More ... |
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| Fortune International Realty Miami Beach, 500 Bay Ln, Key Biscayne Fl 33149 |
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| Gambino Real Estate Corp, 785 Crandon Blvd Ste 201, Key Biscayne Fl 33149 |
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| Global Capital Realty, 225 W Heather Dr, Key Biscayne Fl 33149 |
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| Great Properties International, 750 Allendale Rd, Key Biscayne Fl 33149 |
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| Grg International Properties, 1111 Crandon Blvd Apt C707, Key Biscayne Fl 33149 |
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| Gusman Realty Services, 354 Glenridge Rd, Key Biscayne Fl 33149 |
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| Holmquist, 575 Crandon Blvd Apt 503, Key Biscayne Fl 33149 |
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| Holmquist Real Estate Services, 104 Crandon Blvd Ste 425, Key Biscayne Fl 33149 |
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| Housing And Housing, 121 Crandon Blvd Apt 354, Key Biscayne Fl 33149 |
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| James Stringer Realty, 221 Knollwood Dr, Key Biscayne Fl 33149 |
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| Jryt, Po Box 490441, Key Biscayne Fl 33149 |
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| K B Village Realty, 325 Fernwood Rd Apt 11, Key Biscayne Fl 33149 |
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| Key Biscayne Real Estate, 121 Island Dr, Key Biscayne Fl 33149 |
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| Key Biscayne Realty Group, 260 Crandon Blvd Ste 48, Key Biscayne Fl 33149 |
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| Keyprop, 200 Crandon Blvd Ste 360, Key Biscayne Fl 33149 |
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| Lionstar Realty Group, 151 Crandon Blvd Apt 836, Key Biscayne Fl 33149 |
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| London Real Estate Company, 965 Crandon Blvd, Key Biscayne Fl 33149 |
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| Miami Capital Properties, 260 Crandon Blvd, Key Biscayne Fl 33149 |
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| Miami Industrial Real Estate, 240 Galen Dr Ste 106, Key Biscayne Fl 33149 |
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| Miami's Best Realty, 260 Crandon Blvd Ste 32 Pmb 433, Key Biscayne Fl 33149 |
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| Narwhal Realty, 151 Crandon Blvd Apt 423, Key Biscayne Fl 33149 |
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| Ocean Club Realty, 755 Crandon Blvd, Key Biscayne Fl 33149 |
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| On Course Development, 650 Curtiswood Dr, Key Biscayne Fl 33149 |
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| Padovan Realty Corp, 425 Grapetree Dr Apt 204, Key Biscayne Fl 33149 |
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| Patandpat Bayfront Realty And Associates, 977 Crandon Blvd, Key Biscayne Fl 3314 More ... |
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| Quantum Real Estate, 575 Crandon Blvd Apt 607, Key Biscayne Fl 33149 |
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| Real Estate Quest, 1111 Crandon Blvd, Key Biscayne Fl 33149 |
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| Savitar Properties, 104 Crandon Blvd Ste 306a, Key Biscayne Fl 33149 |
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| Semsch Realty, 328 Crandon Blvd Ste 205-a, Key Biscayne Fl 33149 |
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| State Street Realty, 170 Ocean Lane Dr Apt 306, Key Biscayne Fl 33149 |
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| Three Bridges Realty, 412 Woodcrest Rd, Key Biscayne Fl 33149 |
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| Two Can Realty, 50 Ocean Lane Dr Apt 304, Key Biscayne Fl 33149 |
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| Universal Fidelity Group, 104 Crandon Blvd Ste 323, Key Biscayne Fl 33149 |
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| Universal Key Realty, 240 Crandon Blvd Ste 106d, Key Biscayne Fl 33149 |
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| Urban Star Realty, 959 Crandon Blvd, Key Biscayne Fl 33149 |
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| Urban Worldwide Realty, 155 Ocean Lane Dr Unit 1011, Key Biscayne Fl 33149 |
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| Urdapilleta Real Estate, 104 Crandon Blvd Ste 415, Key Biscayne Fl 33149 |
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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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