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.
| 24/7 Commercial Group, 6036 Ridge Lake Cir, Vero Beach Fl 32967 |
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| Alex Mac William, 2901 Ocean Dr, Vero Beach Fl 32963 |
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| Alex Macwilliam Inc Real Estate, 2901 Ocean Dr, Vero Beach Fl 32963 |
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| Alex Macwilliam Referral Group, 2901 Ocean Dr, Vero Beach Fl 32963 |
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| Alex Villar International Realty Co, 375 Lexington Ave Sw, Vero Beach Fl 32962 |
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| Armfield Wagner Appraisal & Research, 1940 10th Ave, Vero Beach Fl 32960 |
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| Art Krieger Realty, 7625 58th Ct, Vero Beach Fl 32967 |
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| Associate's Referral Network, 479 21st St Se, Vero Beach Fl 32962 |
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| Atlantic Shores Properties, 3107 Ashford Sq, Vero Beach Fl 32966 |
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| Atlantic Shores Realty, Po Box 643804, Vero Beach Fl 32964 |
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| B G N S Corp, 3377 Ocean Dr, Vero Beach Fl 32963 |
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| Barr Realty, Po Box 2157, Vero Beach Fl 32961 |
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| Bayswater Brokerage Florida, 2231 Falls Cir, Vero Beach Fl 32967 |
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| Beach & Beyond Rentals, 2945 Cardinal Dr, Vero Beach Fl 32963 |
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| Beneduce Realty, 1930 14th Ave, Vero Beach Fl 32960 |
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| Bgns Referral Company, 3377 Ocean Dr, Vero Beach Fl 32963 |
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| Boulevard Realty, 1620 Boulevard Village Ln, Vero Beach Fl 32967 |
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| Brooks Real Estate Company, 560 35th Ave Sw, Vero Beach Fl 32968 |
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| By The Sea Real Estate, 2466 57th Cir, Vero Beach Fl 32966 |
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| Candace A Moore & Associates, 1170 6th Ave Ste 19c, Vero Beach Fl 32960 |
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| Cardinal Real Estate, 615 Dahlia Ln, Vero Beach Fl 32963 |
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| Carroll Real Estate Group, 1625 Hidden Pearl Pl, Vero Beach Fl 32963 |
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| Chapper Real Estate, 250 N Harbor Dr, Vero Beach Fl 32960 |
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| Charles A Von Stein, 626 Old Dixie Hwy Sw, Vero Beach Fl 32962 |
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| Cliff Norris Real Estate, 6160 North A1a 2nd Floor, Vero Beach Fl 32963 |
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| Clifton Realty, 5540 N Harbor Village Dr, Vero Beach Fl 32967 |
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| Coastal Housing Corp, Po Box 690938, Vero Beach Fl 32969 |
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| Coastal Properties Group, Po Box 643992, Vero Beach Fl 32964 |
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| Cole W Realty, 4637 Paladin Cir, Vero Beach Fl 32967 |
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| Collier Crawford, 2050 Us Highway 1 Ste 200, Vero Beach Fl 32960 |
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| Compass Point Real Estate, Po Box 650028, Vero Beach Fl 32965 |
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| Conklin Realty, Po Box 1191, Vero Beach Fl 32961 |
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| Cpr Realty, 1265 Little Harbour Ln, Vero Beach Fl 32963 |
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| D & N Referrals, 5065 North A1a, Vero Beach Fl 32963 |
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| Dale Sorensen Real Estate Brevard, 1961 14th Ave, Vero Beach Fl 32960 |
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| Dale Sorensen Real Estate, 3206 Cardinal Dr, Vero Beach Fl 32963 |
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| Dale Sorensen Real Estate, 1961 14th Ave, Vero Beach Fl 32960 |
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| Daley And Company Real Estate, 1836 E Sandpointe Ln, Vero Beach Fl 32963 |
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| David Walsh & Associates Real Estate, 539 Beachland Blvd, Vero Beach Fl 32963 |
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| David Walsh & Associates Real Estate, 800 20th Pl Ste 5, Vero Beach Fl 32960 |
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| David Walsh & Associates Referral Co, 800 20th Pl, Vero Beach Fl 32960 |
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| Dean Chanay, 5395 55th St, Vero Beach Fl 32967 |
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| Di Marzo Realty, 1230 River Reach Dr, Vero Beach Fl 32967 |
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| Donahue Group, 695 Highway A1a, Vero Beach Fl 32963 |
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| E C Norris Enterprises, 4731 Highway A1a, Vero Beach Fl 32963 |
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| Ecn Referrals, 6160 N Aia 2nd Floor, Vero Beach Fl 32963 |
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| Emrick Management Services, Po Box 643521, Vero Beach Fl 32964 |
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| Excel Properties Group, 459 E Tangerine Sq Sw, Vero Beach Fl 32968 |
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| Fareless Properties Real Estate Referrals, Po Box 644379, Vero Beach Fl 32964 |
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| Farless Properties, Po Box 644379, Vero Beach Fl 32964 |
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| Ferrell Real Estate Enterprises, 12546 Highway A1a, Vero Beach Fl 32963 |
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| Florida Agri Properties, 800 8th St, Vero Beach Fl 32962 |
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| Florida Hometown Realty, Po Box 690518, Vero Beach Fl 32969 |
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| Florida Land And Lots Real Estate, Po Box 2214, Vero Beach Fl 32961 |
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| Florida Statewide Realty, Po Box 644397, Vero Beach Fl 32964 |
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| Four Corners, 1825 Wilbur Ave, Vero Beach Fl 32960 |
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| Frank D Wallberg, 2046 Treasure Coast Plz # A-347, Vero Beach Fl 32960 |
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| Furst Company Of Vero Beach, 515 22nd Ave, Vero Beach Fl 32962 |
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| Garofalo Real Estate And Agent Services, 4637 Paladin Cir, Vero Beach Fl 32967 |
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| Glendale Realty, 4520 9th Pl, Vero Beach Fl 32966 |
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| Grall Realty Group, 7555 20th St, Vero Beach Fl 32966 |
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| Grow Florida Land, Po Box 690997, Vero Beach Fl 32969 |
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| H & G Development, 1235 Winding Oaks Cir E, Vero Beach Fl 32963 |
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| Hbres, 4731 N Hwy A1a Ste, Vero Beach Fl 32963 |
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| Headwinds Maintenance, 6365 Atlantic Blvd, Vero Beach Fl 32966 |
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| Housing League, 2046 Treasure Coast Plz Ste A-370, Vero Beach Fl 32960 |
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| I Marks Ii, 2975 5th St Sw, Vero Beach Fl 32968 |
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| Independence Realty Of America, 1808 E Sandpointe Pl, Vero Beach Fl 32963 |
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| Indian River Auctions & Appraisals, 9015 Americana Rd Ste 9, Vero Beach Fl 32966 |
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| Indian River Citrus Sales, 2770 Indian River Blvd Ste 201, Vero Beach Fl 32960 |
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| Indian River Real Estate, 800 8th St, Vero Beach Fl 32962 |
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| Irre Group, 9035 Americana Rd Ste 10, Vero Beach Fl 32966 |
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| Island House Properties, Po Box 5200, Vero Beach Fl 32961 |
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| Island Management Specialists, Po Box 650555, Vero Beach Fl 32965 |
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| Isle Management Corporation, 475 19th Pl, Vero Beach Fl 32960 |
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| J I Property Exchange, 6160 N Highway A1a 2nd Floor, Vero Beach Fl 32963 |
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| John Meikle Realty, 1612 E Camino Del Rio, Vero Beach Fl 32963 |
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| John Thomason Real Estate, Po Box 7346, Vero Beach Fl 32961 |
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| Johns Island Real Estate Co, 1 Johns Island Dr, Vero Beach Fl 32963 |
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| Johns Island Real Estate Referral Co, 1 Johns Island Dr, Vero Beach Fl 32963 |
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| Keller Williams Realty Of Vero Beach, 3775 20th St, Vero Beach Fl 32960 |
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| Keylands Realty, 5220 Us Highway 1 Ste 200, Vero Beach Fl 32967 |
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| Kiesel Realty, 1585 50th Ct, Vero Beach Fl 32966 |
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| Kirk Koehler Broker, 100 Vista Royale Blvd, Vero Beach Fl 32962 |
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| Kite Properties, 1575 Indian River Blvd, Vero Beach Fl 32960 |
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| Lafferty Group Real Estate & Consulting Pa, 939 17th St, Vero Beach Fl 32960 |
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| Laguna Realty, 3505 Ocean Dr, Vero Beach Fl 32963 |
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| Lambert Commercial Real Estate, 2945 20th St, Vero Beach Fl 32960 |
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| Land Corporation Of Florida, 2145 14th Ave Ste 11, Vero Beach Fl 32960 |
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| Laurel Agency, 3201 Cardinal Dr Ste 7, Vero Beach Fl 32963 |
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| Leisure Realty Of Indian River, 835 20th Pl, Vero Beach Fl 32960 |
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| Live Oak Real Estate, 966 Pebble Ln, Vero Beach Fl 32963 |
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| Live Oaks Realty, 3055 Cardinal Dr Ste 101b, Vero Beach Fl 32963 |
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| Lotus Realty, 637 2nd Ln Unit F, Vero Beach Fl 32962 |
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| Lozada Real Estate, 2230 Us Highway 1, Vero Beach Fl 32960 |
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| Lundy Real Estate Consultant, 325 36th Ave, Vero Beach Fl 32968 |
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| Luxury Beach Escapes, Po Box 643717, Vero Beach Fl 32964 |
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| Mac Evoy Real Estate Co, Po Box 650235, Vero Beach Fl 32965 |
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| Majestic Brokerage, 1235 Winding Oaks Circle W, Vero Beach Fl 32963 |
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| Major Realty Of Miami, 4185 Chablis St Sw, Vero Beach Fl 32968 |
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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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