By Richard Montgomery
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Reader question: We want to ask about homeownership. After witnessing the run-up in real estate values in the not-too-distant past and the aftermath of the financial meltdown, we read conflicting information about where real estate values, and the economy are going, and whether or not a home is a good investment. Is owning a home today the right place to invest. What are your thoughts? John and Abby G.
Monty’s answer: The dream of homeownership is a reality in our country. Homeownership is a solid symbol of our free enterprise system and is one of our greatest rights as U.S. citizens. It is encouraged with income tax advantages and often viewed as a sign of stability and commitment. From our youth on, we subtly experienced the security, comfort and prestige that come with owning a home. It is for many a big part of the American dream.
Everyone has a different idea
A home is many different things to different people. It is often an extension of our personality and representation of our individuality. It is a place where we can express our tastes, interests and other personal characteristics. It can also be an indication of success and pride. It is referred to as a “castle,” or seen as a place for privacy or entertainment. That said the value, type and location depend on each of our circumstances. It may not be the biggest or the best home, but it is always “home sweet home.”
Is it for everyone?
Even with the positive images and impressions of home, the fact is, homeownership is not for everyone. If this is your first home, there are many considerations before taking the plunge into home ownership. Besides all of the emotional, there are many responsibilities to evaluate before turning your dream into a reality.
Current homeowners often change their circumstances. Growing older, retiring from the workforce, changes in family size, health and other events will cause us to seek alternatives, but this too requires careful evaluation.
Here is a view of the advantages and disadvantages of home ownership. Consider each one carefully, and perhaps create your own list.
Advantages of homeownership
• Community standing (commitment and involvement; a sense of belonging)
• Financial investment (equity through loan reduction)
• Tax incentives (deduction of loan interest)
• Family security (a place to call “home”)
• Psychological (prestige and status)
Disadvantages of homeownership
• Commitment (saving for a down payment)
• Conviction (borrow and repay the mortgage)
• Maintenance (keep your home clean and in good condition)
• Repairs and improvements (promote safety and maintain the value)
• Extra time (less time to devote to other activities as home ownership requires time)
As you consider the pros and cons above, ask this question: Is the price we pay in sacrifice and hard work worth the benefits and sense of accomplishment that a home offers?
Your home is not an investment
Buying real estate has been considered to be a sound investment. It is unknown if the events of the past several years will have a long-term effect. According to some experts, many areas are rebounding well. One thing is certain; there are not any guarantees with home ownership being a good investment in the future. Real estate is also seen as a hedge against inflation.
It has always been true that not every home will increase in value. Many factors play into that likelihood, some of which are beyond our control. Some of it depends on location, local economies and demographic shifts, but individual choices also play a role.
Do not buy a home depending on it increasing in value. Borrowing on second mortgages created problems for many in the meltdown. Buy it to fit your plans and dreams and as a place to live and be comfortable. The knowledge and information you utilize before you buy and the care and types of improvements you make while you own can have an influence on the resale outcome.
There Is no denying
“Whether you rent or whether you buy, you pay for the home you occupy.” Will you pay for your mortgage or your landlords? You have a choice. Do not overlook the realities of home ownership. It takes an honest evaluation of your circumstances, lifestyle and goals to determine if homeownership is right for you. It all goes back to the dream. Will homeownership continue to be a big part of our American dream? I think so.
Richard Montgomery gives no-nonsense real estate advice to readers’ most pressing questions. He is a real estate industry veteran who has championed industry reform for over a quarter century. You can ask him questions at DearMonty.com.
Dear Monty: Is homeownership right for us?
By Richard Montgomery