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&m Real Estate & Mortgage, 107 Browning Ave Ne, Palm Bay Fl 32907 |
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| Abundant Home Realty, Po Box 110016, Palm Bay Fl 32911 |
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| Aero Real Estate, Po Box 110781, Palm Bay Fl 32911 |
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| All Florida Properties, 1071 Pt Malbr Blvd Ne Ste 202, Palm Bay Fl 32905 |
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| Bradshaw & Sandoval Realty, 411 Mist Ct Se, Palm Bay Fl 32909 |
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| C Wilcox Real Estate, 6255 Minton Rd Ne, Palm Bay Fl 32907 |
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| Cba Realty Group, 2035 Muirfield Way Se, Palm Bay Fl 32909 |
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| Cheryl Smith Realty, 1500 Emerson Dr Se, Palm Bay Fl 32909 |
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| Cj Realty & Associates, 374 Olsen St Sw, Palm Bay Fl 32908 |
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| Collins & Associates Real Estate, 2524 Palm Bay Rd Ne Ste 5, Palm Bay Fl 32905 |
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| Diversified Property Management Of Brevard, 1608 Sunny Brook Ln Ne Ste 107, Palm More ... |
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| Estates Of Grace Realty, 4650 Lipscomb St Ne Ste 20, Palm Bay Fl 32905 |
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| Flamm Real Estate, 9202 Flamms Pl, Palm Bay Fl 32909 |
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| Florida Realty Referrals & Associates, 590 Prelude St Nw, Palm Bay Fl 32907 |
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| Gertrude Singer, 826 Rebus Ave Sw, Palm Bay Fl 32908 |
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| Good Ground Real Estate & Development, 4670 Lipscomb St Ne Ste 3, Palm Bay Fl 32 More ... |
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| H W H, 2550 Palm Bay Rd Ne Ste 214, Palm Bay Fl 32905 |
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| Hrh Real Estate, 184 Awin Cir Se, Palm Bay Fl 32909 |
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| J R Hannan Realty, 2115 Palm Bay Rd Ne Ste 5e, Palm Bay Fl 32905 |
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| Johnson International Realty, 304 Hanford Rd Sw, Palm Bay Fl 32908 |
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| Katlan Realty, 5599 Babcock St Ne, Palm Bay Fl 32907 |
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| Kl Realty, 366 Bordeaux Ave Ne, Palm Bay Fl 32907 |
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| Leonard Duncan Realty, 210 Ring Ave Ne Ste 101, Palm Bay Fl 32907 |
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| Lifestyle Shops Realty, 110128 Palm Bay, Palm Bay Fl 32911 |
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| Location Real Estate, Po Box 61745, Palm Bay Fl 32906 |
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| M David Moallem, 1663 Georgia St Ne Ste 200, Palm Bay Fl 32907 |
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| Monari, Po Box 101157, Palm Bay Fl 32910 |
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| Murray Realty Of Brevard, 2475 Palm Bay Road Suite 210, Palm Bay Fl 32905 |
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| National Realty Of Brevard, 4670 Babcock St Ne Ste 3, Palm Bay Fl 32905 |
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| One's Real Estate, 2550 Palm Bay Rd Ne Ste 107, Palm Bay Fl 32905 |
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| Real Estate Plus Reo Executives, Po Box 060322, Palm Bay Fl 32906 |
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| Sonshine Realty, Inc. (owens Group), 2732 Palisades Dr Se, Palm Bay Fl 32909 |
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| Space Coast Realty Corp, 2061 Palm Bay Rd Ne Ste 104, Palm Bay Fl 32905 |
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| Teresa M Suarez Realtor, 482 Barcelona Rd Se, Palm Bay Fl 32909 |
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| V Real Estate Group, Po Box 100296, Palm Bay Fl 32910 |
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| Vektor Real Estate, 886 Altona St Nw, Palm Bay Fl 32907 |
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| Village Realty Services, 2179 Granville St Ne, Palm Bay Fl 32907 |
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| Water Mill Properties, Po Box 100851, Palm Bay Fl 32910 |
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| Wave Crest Realty, 1201 Wayne Ln Ne, Palm Bay Fl 32905 |
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| Welcome Home Realty Of Brevard, 4651 Babcock St Ne Ste 6b, Palm Bay Fl 32905 |
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| Wickham Realty Group, Po Box 111462, Palm Bay Fl 32911 |
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| Wilmar Enterprises, Po Box 061300, Palm Bay Fl 32906 |
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| Woodlake Realty, 1564 Waldorf Cir Ne, Palm Bay Fl 32905 |
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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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