“Home Ownership is the Key to Wealth”
“Build Your Wealth through Home Equity”
“Your Home is your Best Asset”
I have heard all of these comments many times before. The National Association of Realtors (NAR) is blanketing the airwaves saying these exact things, and I disagree.
It has only been in the past 10 years or so that home prices have exploded. For the past 100 years home prices have really done nothing more then keep up with inflation. The graph below clearly shows that home values have been pretty steady for the past 100 years, with the exception of the Great Depression, and the current mess that banks, the fed, and people who don’t understand finance have gotten us into.
There might be a correlation between people who are wealthy, and the percent that own their home. Everyone knows that correlation is not causation. I believe that people are rich in spite of their houses, rather then because of them. I am in no hurry to buy a house. Yes I believe that I would enjoy it immensely and take great pride in it, but I can wait. I believe (know) that a home owner should view their home as a place to live, and not an ATM machine to draw equity from to take a vacation.
Why pay rent when you can buy? This is a commonly asked question. When you rent your home you are borrowing a few rooms and maybe a yard, and you pay someone else money for this. What do you think the interest on your mortgage is? It is simply paying someone for lending you their money. So in reality you are indeed paying “rent” on the banks money.
But you can deduct the interest! Sure this is true. You spend $1 to get 25 cents back in taxes. Wouldn’t you be better off just renting a comparable place for less then the cost of your mortgage? Trust me it can be done, the place that I rent cost a lot less in rent then it would in mortgage payments if I were to buy it.
Oh god! Its hidden costs! Run for your lives!
Nothing is more annoying then a $20 service charge on your credit card or cable bill. How would you react if you got a $1000 bill for when your air condition goes out, or furnace kicks the bucket? I don’t even own a home and I can name plenty of hidden costs that I would worry about. That is why I rent and when my dishwasher dies, pipes break, or garage door opener refuses to open I just call my land lord. I let them come over the next day, fix it for free, and I don’t even have to be there.
A home is a place to live. I will let other people take the risk and pay the bank “rent” for its money. I will be happy in my rented place, and if I choose to move I can relocate with no problems and not be stuck owning a home I can’t live in.
Now I will buy a house, but prices have to come down a fair amount before I do. So if you choose to buy a house, remember it’s a place to live, and not the key to riches.
Devil’s advocate…Grandma and Grandpa did pretty well making wealth off of their real estate investments. And I pull in $200 a month on the condo I bought….