Reasons Why You Should Buy A Texas Home
Owning a home is an investment, however, it actually is not. Home-ownership is an essential wealth-building tool, apart from the fact that it can be financial suicide. Historically, owning a house outpaced stocks, but they actually do not.
Rent Or Buy: Which Is Better?
Home-ownership in the past was an affordable, accessible option. However, the recent financial crisis saw the value of homes drop dramatically, with home prices reaching astronomical levels now due to a shortage in housing, things have changed dramatically over the last ten years. Finding affordable housing can result in increased commute times and having to move away from jobs, which explains the increase in “super commuters” all across the United States.
Is it still worth it to own a home? The answer varies depending on whom you ask, the inputs that are included in the financial model, and one’s general investment philosophy – so that answer is “it depends” most of the time.
There are numerous online tools that are available to assist you in assessing whether or not your current financial situation would result in monthly mortgage payments that are lower than your current monthly rent. However, there are many other factors that need to be considered before you make what will probably be the biggest purchase you ever make in your life. We have attempted to simplify the arguments for reasons why you should and should not buy a house. If you are a longtime renter who struggles to wrap your head around the question, the following are two opposing perspectives on the great home-ownership debate.
Why Should You Buy A House?
There are many financial advisers and academics, equipped with economic models and spreadsheet, who are very happy to show off their fiscal wisdom and arriving at the following conclusion: in terms of dollars and cents, it doesn’t add up to own a house. However, when trying to determine whether to buy a house or not, you need to consider qualitative factors as well as quantitative ones. Ultimately, you need someplace to live.
1. The Shelter Is One Of Our Basic Human Needs
Frequently the benefits over home-ownership are discussed on the basis of return on investment. However, that is not the best way to think about this issue. One of our most important human needs is shelter. It will not make financial sense for everybody in every location to buy a house, but for many people, it will. If it does for you, the reason you should buy a house is due to needing shelter.
Anybody who has been following current events over the past two years most likely has an increased awareness of just how fragile our organizing principles and institutions are that provide us with a certain degree of societal stability for debating home-ownership from the perspective of an investment rather than a basic need. If any massive shift were to occur in our government or political alliances, personally, I would much rather own the house I lived in than be subject to the wishes and needs of a landlord. That might sound a bit paranoid, but do you want to find out whether or not it is paranoid thinking when you currently have the option to purchase a house?
2. It Isn’t An Investment, But It Is Also Not Financial Suicide
Fact: You shouldn’t purchase a home thinking that you are going to get rich off of the appreciation of its value or believing it will pay for itself ultimately. That might be true in some markets. However, it is better to not view owning a home as an investment asset such as bonds and stock, but more as the four walls or more where you live.
However, if you do your research to ensure this is the right time for you to purchase a home financially, professionally, and personally, then it won’t be a bad investment for you, no matter where you happen to live. That is due to the fact that the underlying supply and demand conditions will, over time, continue to push the value of your home up to at least keep pace with inflation.
Although the supply of houses is being restricted currently by numerous public policy positions and economic factors, the number of people who need shelter will continue to increase (unless, of course, a catastrophe strikes which would make the question of whether you should own a home or not the last thing that you need to worry about).
It is true that it is overly simplistic to state that the prices of houses will always increase, as anybody who has lived through the last 10 years knows. However, the underlying conditions that have resulted in a fairly swift recovery for housing should continue.
3. It Is Easier To Retire As A Homeowner
I’m sure you have noticed that it is pretty expensive to be old, due to healthcare’s skyrocketing costs. When you add in rising housing prices, a social safety net that is increasingly in jeopardy, and the strong likelihood that you will be living on a fixed income and have a lower earnings potential, it is easy to see how not needing to worry about paying rent on a monthly basis could be very beneficial. You will still need to pay insurance, property taxes and other maintenance expenses, but there is a very good chance that it will be less than the amount that you pay in rent.
The detractors of home-ownership often bring up the opportunity cost that is involved in investing in a house. If you assume that stocks outperform house appreciation, and that is a completely reasonable position to take, then you may think you would be better off putting your money into equities and then buying a house with the proceeds when you reach retirement age or use the money to pay your rent with.
You can definitely take that route. However, it is a fairly roundabout way of securing a house when you could simply use the money directly to purchase a home. There are also added risk with the stock market’s higher returns. What will you do if the market is down when you get to retirement age and you don’t have enough money to purchase your house? Or what if your investments end up going bad and you are completely wiped out?
You should seriously consider playing it safe, and simply purchasing a house, and do it before your generation hits retirement age and the housing market is overwhelmed. If you can pay off your house completely, or something close to that, you will always have the option of trading down to a less expensive house and pocketing the difference, which will give you a place to live during your golden years – and have some extra money, also.