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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsAmericans think owning a home is better for them than it is
Some people never learn: Polls show that Americans still view their homes as the best and safest place to invest their hard-earned cash.
Gallup asked Americans this month to choose the best long-term investment. Real estate was the most common pick, ahead of mutual funds, bonds and other options. Similarly, Fannie Maes National Housing Survey asked Americans to assess whether various kinds of assets amounted to a safe investment with a lot of potential. As has been the case since before the financial crisis, buying a home beat out all the alternatives.
The fact that Americans still financially fetishize homeownership baffles me. Never mind that so many people lost their shirts (among other possessions) in the recent housing bust. Over an even longer horizon, owning a home has not proved to be a terribly lucrative investment either. Dont take my word for it; ask Robert Shiller, winner of the 2013 Nobel Prize in economics who previously became a household name for identifying the housing bubble.
People forget that housing deteriorates over time. It goes out of style. There are new innovations that people want, different layouts of rooms, he told me. And technological progress keeps bringing the cost of construction down. Meaning your worn, old-fashioned home is competing with new, relatively inexpensive ones.
Read More: http://www.washingtonpost.com/opinions/catherine-rampell-americans-think-owning-a-home-is-better-for-them-than-it-is/2014/04/21/5e9f4dd2-c979-11e3-93eb-6c0037dde2ad_story.html
Warpy
(111,261 posts)and who stay in that house until the mortgage is paid off 30 years later. That means they own a business, work in a family owned business, or luck into an extraordinarily stable career that will never transfer them. Then, thirty years down the line, they'll be living in paid off property and their expenses will be upkeep and property taxes plus insurance. People who are in paid-for houses can live modestly on social security but survive better than people who are not living in paid for homes. In addition, even in areas where housing prices have declined steeply since 2008, the housing is still a major investment that can be sold in case of health emergency and will also give their heirs something to sell.
I have to say that living in a paid for house cut my expenses drastically even though major appliances are starting to go and I hate my kitchen.
What doesn't work is hopping from house to house because you're getting transferred every two or three years or because the kids are getting bigger or because they're trend followers and they want the latest things. They risk hitting retirement (or corporate expiration date) age with large mortgages that won't be paid off until they're in their 80s. They won't be able to live on their social security and will likely put those houses on the market so they've got something besides a part time job to live on.
Jesus Malverde
(10,274 posts)Warpy
(111,261 posts)is likely to be "company folded, reinvented itself in China, town died."
peacebird
(14,195 posts)And our electric is "supported" by the 20 photovoltaic panels on our roof, so we sell power back to the utility during the day. I am quite sure that our paid off home will help us tremendously in retirement. No rent to increase every year. What is not to love?
Our home, with its five acres bordering a river, gives us a pretty comfortable feeling, and a feeling of security that renting never could.
Jesus Malverde
(10,274 posts)especially the solar and lot size.
Art_from_Ark
(27,247 posts)are made of "ticky-tack", and they start falling apart fairly soon.
oldhippie
(3,249 posts)..... where I live, not an investment. I paid cash for it when I had it built 17 years ago, and don't plan on moving or selling it.
Samantha
(9,314 posts)Civics 101 -- if one does not have a home which is paid for, he or she has NOTHING. Impoverished people know the most important thing one can have in life is a roof over their head. If one does have that, other critical things necessary to maintain life such as food can be obtained in several ways which cost no money. But without an address, it is difficult, and sometimes impossible to acquire other key things.
Having a home that is mortgage-free reduces one's chances of ever being homeless. Other investments such as those contained in financial portfolios have a way from time to time of "disappearing" ....
But once you have that in the works, then you can spring for the luxury of gambling other dollars on the stock market and in other financial arenas.
Sam
Sherman A1
(38,958 posts)of home ownership?
I would suspect that Catherine Rampell owns her home. Could be wrong but just a guess.
quaker bill
(8,224 posts)I never even came close to going upside down. I bought under market and before the bubble. I invested sweat equity to repair a somewhat distressed rental. With the rebound over the last 2 years, my likely equity at prevailing prices homes have sold at in the blocks surrounding my place roughly equals a refund of the total of my payments, principal and interest for the last 17 years.
Is a refund of +/- 100% of the payments a good investment? No not really. An investment would have realized gains. The only problem with that analysis is that I would have had to pay to live somewhere. So if I get my money back, my gains will be 17 years of living in this house for free. I am good with that.
The refund of those payments will more than fully fund the purchase of my next place. In short, I will likely be debt free, and living in a paid off house on the day I qualify for pension payments.
dixiegrrrrl
(60,010 posts)It turns out that rents in my area of town go for twice as much as my house payment.
and that has been true of both houses I have owned in this town.
And since I don't have to pay property taxes, only annual house insurance under 700.00 a year, and low mortgage..
sometimes owning is a much better deal than renting.
Luckily, older houses like mine are considered desirable in this area, so re-sell won't be a problem.
In fact, realtors inquire often if we would be interested in selling the house.
sendero
(28,552 posts).... if you are going to have to move around, then owning is probably not in the cards for you.
But if you think that, in ANY context, renting is less expensive than owning, well your business instincts are crap.
If you are renting, you are paying all of the costs of owning the property, taxes, insurance, mortage, plus profit for the landlord. It is really that simple and any hand-waving to assert otherwise is ludicrously wrong.
It does not always make sense to buy. But in any case where you are renting, you are paying through the nose for the privilege, and that is a fact.