With the burst of the housing bubble, credit crisis, and millions of foreclosures across the country, you may wonder if buying a home is such a good idea after all. However, it’s important to consider all of the facts. The important message to take away from these events is not that buying a home is a bad idea, but that you must be smart about buying your home.
The housing market, like every type of market, unavoidably has its ups and downs. That doesn’t mean buying a home is a bad investment. As a long-term investment, homeownership is still one of the best investments for individual households. Historically, real estate has consistently increased in value, despite shorter periods of depreciation due to local markets and/or national economic conditions. The data shows that homes generally appreciate about 5% per year.
Savings & Investment
Five percent may not seem like a great return on investment, but you have to think about it in the context of the situation. For example, let’s say you put 10% down on a $200,000 house. That’s a $20,000 down payment, or initial investment. At a 5% annual appreciation rate, your $200,000 home would gain $10,000 in value during the first year. Earning $10,000 on an investment of $20,000 is a whopping 50% return.
For further perspective, let’s say instead of spending that $20,000 on a down payment, you invested it in the stock market. With a 5% return, you would gain only $1,000 in profit.
So now you’re saying that a home may have a higher return, but that’s before you consider all of the costs of home ownership, such as taxes, etc. Well, think of it this way: your property taxes as well as the interest on your mortgage are both tax deductible. You can deduct those costs from your income, thus reducing your overall taxable income. In other words, the government is subsidizing your home.
It’s easy to get carried away with all of the economic reasons for home ownership, but it’s important to remember that not every reason is financial. Have you ever wanted to paint the walls of your apartment? Well when you’re renting, you can’t. Has anything in your apartment ever needed updating, but the landlord refused to do it? When you own a home, you can make the space yours in almost any way you want. And you benefit when you do home improvements, both financially and psychologically. Homes generally have more space, for storage, living, etc. than other living arrangements. Not to mention that you have space outdoors for barbecuing, pets, and kids. Owning your home carries with it a sense of pride, accomplishment, and even an elevated social status.
So when you’re considering buying a home, consider the broad range of benefits that owning a home can have. And always make sure you have an experienced real estate agent and loan officer to help make sure you’re getting a home that is right for you, both financially and psychologically.
Tim Tanz, CRS, GRI, ABR
1034 S Brentwood Blvd
St Louis, MO 63117
---We trusted Tim so well that we purchased a home through him simply by doing FaceTime with him at an open house. We lived in a different State and couldn't make it in time to a home that was having multiple offers and Tim made sure to put us first, thus guaranteeing our chance to make the successful bid that landed us our dream home! C. Haven -- 1201 Dunston Dr, Saint Louis, MO 63146
---We have purchased 2 homes and sold 1 home with Tim as our agent. If we have the opportunity to relocate back to the St. Louis area, our first call will be to Tim. When we purchased our first home through Tim, we didn't know anyone or very much about the St. Louis area. Tim took the time to show us many different areas which was very helpful in making our decision. He was very professional, detailed and walked us through the entire process. He made sure all the little details were taken care of. Tim has integrity and will tell you the truth about the market or about your home, even if you don't want to hear it. When we purchased and later sold our 2nd home, we didn't think twice about calling Tim. In my opinion, this one act put Tim way above the rest. During the sale of our last home, we had an issue with our moving company (basically they didn't show up the first day), so we had only one day to get our stuff out of the house and clean it up for the new owners. Tim came over and helped us with patching nail holes and cleaning. Not every agent would do that to help out their client. G. Allswede – 3476 Covington Parkway.