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.
| Naples Referral Network, Attn: Corey Brennan, Naples Fl 34013 |
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| Re/max Realty Select, Attn: Corey Brennan, Naples Fl 34013 |
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| 41 West Realty, Po Box 9124, Naples Fl 34101 |
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| A Delta Realty Of Naples, 1415 Panther Ln Ste 319, Naples Fl 34109 |
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| A Plus Realty, Po Box 990783, Naples Fl 34116 |
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| A R B C Realty Of Southwest Florida, 5645 Strand Blvd, Naples Fl 34110 |
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| Aadvisor Rentals, 485 5th Ave S, Naples Fl 34102 |
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| Abc Realty Of Naples, 2661 Airport Rd S Ste B101, Naples Fl 34112 |
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| Aberdeen & Crail, 733 Riviera Dr, Naples Fl 34103 |
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| Abitare International Realty, 2846 Tiburon Blvd E Apt 102, Naples Fl 34109 |
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| Accurate Realty & Appraisal Services, Po Box 110567, Naples Fl 34108 |
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| Achieve Realty, 12268 Tamiami Trl E Ste 303, Naples Fl 34113 |
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| Agnelli Real Estate Associates, 7800 Classics Dr, Naples Fl 34113 |
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| Agr Twineagles Realty, 3066 Tamiami Trl N, Naples Fl 34103 |
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| Ajb Realty, 2280 Carter St, Naples Fl 34112 |
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| Ajs Realty Group, 2950 Immokalee Rd Ste 2, Naples Fl 34110 |
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| Alderuccio Corporation, 1960 Tarpon Rd, Naples Fl 34102 |
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| All In One Realty Group, 10919 Parnu St, Naples Fl 34109 |
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| Allied International Brokers, 2325 Kings Lake Blvd, Naples Fl 34112 |
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| Amc Elite Properties, 4231 Crayton Rd, Naples Fl 34103 |
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| America's Realty Corp, Po Box 110363, Naples Fl 34108 |
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| American Capital Resources, 4100 Corporate Sq Ste 116, Naples Fl 34104 |
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| American Citigroup Real Estate, 50 Wilson Blvd S Ste 9, Naples Fl 34117 |
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| Amerivest Realty, 4851 Tamiami Trl N Ste 258, Naples Fl 34103 |
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| Andrea Deane & Associates, 1268 4th St S, Naples Fl 34102 |
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| Annual Rentals, 1100 5th Ave S Ste 201, Naples Fl 34102 |
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| Another Day In Paradise Realty Corporation, Po Box 25, Naples Fl 34106 |
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| Appraisal Shoppe, 2335 Tamiami Trl N Ste 201, Naples Fl 34103 |
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| Aqualand Realty, 1100 5th Ave S Ste 201, Naples Fl 34102 |
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| Arbor Trace Realty, 1000 Arbor Lake Dr, Naples Fl 34110 |
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| Arc Realty Advisors, 4795 Enterprise Ave Ste 201, Naples Fl 34104 |
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| Arnold & Arnold, 1100 Commercial Blvd Ste 118, Naples Fl 34104 |
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| Associates Real Estate Services, 5027 Tamiami Trl E, Naples Fl 34113 |
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| Atrix Realty, 1237 Pompei Ln, Naples Fl 34103 |
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| Audubon Properties, 216 Cheshire Way, Naples Fl 34110 |
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| Baber Realty, 7935 Airport Rd N Ste 218, Naples Fl 34109 |
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| Bang Realty, 4851 Tamiami Trl N Ste 200, Naples Fl 34103 |
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| Barclays Real Estate Group, 1415 Panther Ln # 119, Naples Fl 34109 |
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| Barrron Colier Commercial, 2600 Golden Gate Pkwy, Naples Fl 34105 |
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| Bartley Realty Lllp, 201 8th St S Ste 306, Naples Fl 34102 |
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| Bay Forest Real Estate Services, 377 Bay Forest Dr, Naples Fl 34110 |
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| Bayshore Realty Of Naples, 6220 Taylor Rd Ste 103, Naples Fl 34109 |
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| Bayside Realty Swfl, 2335 Tamiami Trl N Unit 203, Naples Fl 34103 |
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| Beach & Mountain Realty, 3062 Sandpipr Bay Cir Apt K306, Naples Fl 34112 |
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| Beachfront Properties, 8156 Fiddlers Creek Pkwy, Naples Fl 34114 |
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| Beachwood Properties, 1200 Cherrystone Ct Apt B207, Naples Fl 34102 |
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| Benoit Properties, 2180 Immokalee Rd Ste 313, Naples Fl 34110 |
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| Berson Realty Group, 557 Springline Dr, Naples Fl 34102 |
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| Best Real Estate And Mortgage, Po Box 112288, Naples Fl 34108 |
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| Beth Rose Real Estate And Auctions, 11105 Palmetto Ridge Dr, Naples Fl 34110 |
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| Bill Roye Auctions, 2228 Imperial Golf Course Blvd, Naples Fl 34110 |
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| Bishop Realty, 5051 Castello Dr Ste 30, Naples Fl 34103 |
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| Bishop Realty Of Naples, 5051 Castello Dr Ste 30, Naples Fl 34103 |
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| Blue Beach Home, 2886 14th Ave Ne, Naples Fl 34120 |
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| Blue Water Realty Of Naples, 3748 Arnold Ave, Naples Fl 34104 |
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| Boff Investments, 7995 Mahogany Run Ln, Naples Fl 34113 |
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| Bosley Real Estate Group, 2023 Morning Sun Ln, Naples Fl 34119 |
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| Brand And Associates, 3960 Radio Rd Ste 208, Naples Fl 34104 |
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| Bristol Properties International, 791 10th St S Ste 202, Naples Fl 34102 |
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| Bristol Referral Network, 791 10th St S Ste 202, Naples Fl 34102 |
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| Bud Coleman Associates, 4060 Tamiami Trl N Ste 1, Naples Fl 34103 |
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| Burge Realty Group, 5926 Premier Way Ste 114, Naples Fl 34109 |
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| Business Intermediaries, 877 91st Ave N Ste 2, Naples Fl 34108 |
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| Buy Naples Today, 853 Vanderbilt Beach Rd # 228, Naples Fl 34108 |
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| C Elite Properties & Associates, 2367 Vandrblt Bch Rd Ste 808, Naples Fl 34109 |
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| Cameron Real Estate Services, 525 Murex Dr, Naples Fl 34102 |
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| Canada & Associates Of Florida, 501 Goodlette Rd N Ste A206, Naples Fl 34102 |
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| Canon Realty Of Naples, 2167 Pinewoods Cir, Naples Fl 34105 |
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| Capri Realty, 365 Capri Blvd, Naples Fl 34113 |
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| Cardinal Real Estate Services, 4670 Cardinal Way Ste 302, Naples Fl 34112 |
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| Carlyn Llc, Realtors, 305 Goodlette Frank Rd S #205c, Naples Fl 34102 |
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| Carroll & Carroll, 2805 Horseshoe Dr S Ste 1, Naples Fl 34104 |
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| Charming Homes Realty, 3200 Bailey Ln Ste 198, Naples Fl 34105 |
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| Cliffoney Realty, 2359 Vandrblt Bch Rd Ste 409, Naples Fl 34109 |
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| Clyde C Quinby Realty, 3785 Airport Rd Unt C, Naples Fl 34105 |
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| Coast Communities Realty, 3050 Horseshoe Dr N Ste 105, Naples Fl 34104 |
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| Coastal Breeze Homes, 7555 Treeline Dr, Naples Fl 34119 |
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| Coffey Real Estate Services Corp., 5027 Tamiami Trl E, Naples Fl 34113 |
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| Collier Condominium Management, 1040 6th Ave N, Naples Fl 34102 |
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| Collier Enterprises Realty Group, 2550 Goodlette Rd N Ste 100, Naples Fl 34103 |
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| Commercial Management Of Naples, 5010 Tamiami Trl N, Naples Fl 34103 |
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| Compass Real Estate, 561 31st St Sw, Naples Fl 34117 |
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| Connor & Connor Co, 163 Carica Rd, Naples Fl 34108 |
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| Consortium Real Estate Services, Po Box 110007, Naples Fl 34108 |
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| Corporate Realty & Development, Po Box 112337, Naples Fl 34108 |
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| Costantini Realty, 3361 Tamiami Trl N, Naples Fl 34103 |
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| Coventry Properties, Po Box 110546, Naples Fl 34108 |
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| Cozy Naples Properties, 4930 Tallowood Way, Naples Fl 34116 |
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| Cozy Realty, Po Box 11716, Naples Fl 34101 |
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| Crifasi Management, 2376 Immokalee Rd, Naples Fl 34110 |
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| Crifasi Real Estate, 2376 Immokalee Rd, Naples Fl 34110 |
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| Crystal Lake Sales, 14960 Collier Blvd, Naples Fl 34119 |
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| D & R Realty Group, 51 Heritage Way, Naples Fl 34110 |
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| Daane Properties, 1387 Cooper Dr, Naples Fl 34103 |
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| Damico Realty Incorporated, 509 Bay Villas Ln, Naples Fl 34108 |
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| Daniel Decaro Real Estate Auctions, 696 Spyglass Ln, Naples Fl 34102 |
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| Data Realty, 12600 Colliers Reserve Dr, Naples Fl 34110 |
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| Delgado Realty Group, 2822 68th St Sw, Naples Fl 34105 |
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| Dennis J Lynch Pa, 4077 Tamiami Trl N Ste D201, Naples Fl 34103 |
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| Development Properties, 82 Fountain Cir, Naples Fl 34119 |
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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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