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 R E A Real Estate Appraisers, Po Box 334, Winter Haven Fl 33882 |
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| A+ Realty, 277 Magnolia Ave Sw, Winter Haven Fl 33880 |
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| Action Realty Of Polk County, 251 1st St S, Winter Haven Fl 33880 |
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| Advantage Team Realty, 331 W Central Ave Ste 224, Winter Haven Fl 33880 |
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| Appraisal Group, Po Box 778, Winter Haven Fl 33882 |
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| Archer Crown Management, 3560 Crump Rd, Winter Haven Fl 33881 |
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| Associate Realty Referrals Network, Po Box 105, Winter Haven Fl 33882 |
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| Berkshire Hathaway Homeservices Results Realty, 365 3rd St Nw, Winter Haven Fl 3 More ... |
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| Blue Key Properties, 939 W Heron Cir, Winter Haven Fl 33884 |
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| Booth Herbert & Co, Po Box 1202, Winter Haven Fl 33882 |
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| Brokers Realty Of Central Florida, 1142 1st St S, Winter Haven Fl 33880 |
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| Brokers Realty Referral, 1142 1st St S, Winter Haven Fl 33880 |
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| Bruce L Parker, 601 Country Ln Ne, Winter Haven Fl 33881 |
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| By Design Real Estate Services, 220 Ruby Lake Ln, Winter Haven Fl 33884 |
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| Cassidy Homes, 346 E Central Ave, Winter Haven Fl 33880 |
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| Cassidy Realty, 346 E Central Ave, Winter Haven Fl 33880 |
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| Central Florida Commercial Realty, 5813 Driftwood Dr, Winter Haven Fl 33884 |
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| Cfo Real Estate Services, 141 5th St Nw Ste 300, Winter Haven Fl 33881 |
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| Chain Of Lakes Realty, Po Box 383, Winter Haven Fl 33882 |
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| Choice Properties Of Central Florida, 1620 6th St Se, Winter Haven Fl 33880 |
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| Choice Properties Referrals Of Central Florida, 1620 6th St Se, Winter Haven Fl More ... |
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| Crosby & Associates, 141 5th St Nw Ste 202, Winter Haven Fl 33881 |
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| Cross Realty Of Central Florida, Po Box 1458, Winter Haven Fl 33882 |
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| Florida Ag Realty, 2558 Partridge Dr, Winter Haven Fl 33884 |
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| Florida First, 2120 Sheffield Rd, Winter Haven Fl 33880 |
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| Florida First Realty, 162 2nd St Sw, Winter Haven Fl 33880 |
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| Florida Real Estate Options, 3560 Crump Rd, Winter Haven Fl 33881 |
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| Foremost, 2006 Helena Rd, Winter Haven Fl 33884 |
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| Friendly Realty, 333 6th St Sw, Winter Haven Fl 33880 |
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| Garden Grove Realty, 2284 Crump Rd, Winter Haven Fl 33881 |
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| Govoni & Company, 6039 Cyprs Gdns Blvd Ste 143, Winter Haven Fl 33884 |
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| Green Acres Real Estate, Po Box 184, Winter Haven Fl 33882 |
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| Harmon Realty Of Winter Haven, 320 4th St Nw, Winter Haven Fl 33881 |
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| Haven Realty Services, Po Box 9447, Winter Haven Fl 33883 |
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| Hl Management Services, 7131 Summit Dr, Winter Haven Fl 33884 |
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| Imperial Polk Realty Corp, 1810 6th St Se, Winter Haven Fl 33880 |
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| Jmrs Investments, 105 1st Street North, Winter Haven Fl 33881 |
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| John Wood Realty, 3601 Cypress Gardens Rd Ste A, Winter Haven Fl 33884 |
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| John Wood Realty Referrals, 3601 Cypress Gardens Rd, Winter Haven Fl 33884 |
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| Joyce Frazier Realty, 6629 Westchester Dr Ne, Winter Haven Fl 33881 |
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| Judy B Cleaves Properties, 131 5th St Nw, Winter Haven Fl 33881 |
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| Julie Matthews Group, 725 W Central Ave, Winter Haven Fl 33880 |
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| Keller Williams Realty Of Highlands County, 407 1st St S, Winter Haven Fl 33880 |
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| Keller Williams Realty Of Winter Haven, 407 1st St S, Winter Haven Fl 33880 |
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| La Mond Realty, 1950 Cypress Gardens Blvd, Winter Haven Fl 33884 |
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| Lakefront Investment Realty, 312 W Central Ave Ste 206, Winter Haven Fl 33880 |
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| Lockhart & Associates, 826 1st St S, Winter Haven Fl 33880 |
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| Merline Parker Realty, 940 Avenue T Se, Winter Haven Fl 33880 |
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| Norris & Company Realty, Po Box 791, Winter Haven Fl 33882 |
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| Philip's Realty & Investments, 111 W Central Ave, Winter Haven Fl 33880 |
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| Pioneer Property Management, 6356 Cypress Gardens Blvd, Winter Haven Fl 33884 |
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| Prather Realty, 1035 34th St Nw, Winter Haven Fl 33881 |
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| Progress Homes Realty, 274 W Central Ave Ste A, Winter Haven Fl 33880 |
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| Property Advisers, 2408 Melrose St, Winter Haven Fl 33881 |
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| Quinn & Company Realtors, 1159 1st St S, Winter Haven Fl 33880 |
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| Race Realty, Po Box 1436, Winter Haven Fl 33882 |
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| Re/max Associate Realty, Po Box 105, Winter Haven Fl 33882 |
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| Real Estate Central Group, Po Box 1416, Winter Haven Fl 33882 |
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| Real Estate Central Referrals, Po Box 1416, Winter Haven Fl 33882 |
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| Real Estate Investment & Asset Services, 375 E Central Ave, Winter Haven Fl 3388 More ... |
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| Reliable Source Realty, 2700 Rochelle Dr, Winter Haven Fl 33881 |
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| Seckel Brokerage And Investments, Po Box 9446, Winter Haven Fl 33883 |
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| Silvertree Realty, 136 Audubon Rd, Winter Haven Fl 33884 |
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| Smart Realty Of Winter Haven, 407 1st St S, Winter Haven Fl 33880 |
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| Southern Professional Real Estate, Po Box 3096, Winter Haven Fl 33885 |
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| Southern Properties Of Polk County, Po Box 7407, Winter Haven Fl 33883 |
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| Stambaugh, 500 Orchid Springs Dr, Winter Haven Fl 33884 |
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| Stones Real Estate Firm, 431 Ruby Lake Pl, Winter Haven Fl 33884 |
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| Strongvox, 6039 Cypress Garden Blvd, Winter Haven Fl 33884 |
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| Sun N Lakes Realty, 1110 Meadow Lark Ln, Winter Haven Fl 33884 |
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| Thomas Realty, 1020 Mockingbird Cir, Winter Haven Fl 33884 |
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| Town & Country Real Estate Of Winter Haven, 277 Magnolia Ave Sw, Winter Haven Fl More ... |
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| Town & Country Referrals L C, 277 Magnolia Ave Sw, Winter Haven Fl 33880 |
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| Trade Winds Realty, 4132 Martindale Loop, Winter Haven Fl 33884 |
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| Trueheart Properties, Po Box 273, Winter Haven Fl 33882 |
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| Turner Properties Of Central Florida, 3333 Dundee Rd, Winter Haven Fl 33884 |
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| Village Realty Of Winter Haven, 2500 Recker Hwy, Winter Haven Fl 33880 |
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| Watson & Watson Inc Realtors, 6650 State Road 544, Winter Haven Fl 33881 |
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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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