People who are 65+ believe that home ownership is a good investment much more than the younger generations, according to a Wall St. Journal article that published findings from a survey just released by the Pew Research Center. This and a heated discussion with a fellow Active Rain blogger got me thinking about what we should learn from our parents' generation about buying a home. After all, they made the real estate market work for them over time. Some of my peers are losing their shirts on the real estate market and seem to be more cynical in the process.
The survey said that 48 percent of those age 65+ said that owning a home has been a good investment. My parents are about in that category. Of those who are my age (age 30 to 49), only 32 percent said it was a good investment. You can read the article here http://blogs.wsj.com/economics/2011/04/12/real-estate-bust-hasnt-dimmed-americans-faith-in-real-estate/?mod=google_news_blog.
My conversation with Mike, a fellow blogger, was about whether we agree that the government should be more stringent with first-time buyers by making them put 20 percent down on a home. Mike said in his day, that was the norm. I asked him how he achieved it. He said by working two jobs and going without some things. My parents did not put 20 percent down on a home, but they did put 10 percent down on their $57,000 home. Today it is worth in the low $300,000 price range. They feel it is a good investment.
One thing my parents did right is they purchased their home with the intent of staying a while and raising a family. When I say a while, I mean 31 years. As others outgrew their homes and "upgraded," my parents made the three bedroom colonial they had work for them. I have read that the average family's home needs change every 5 to 7 years.
We seem to be a generation that has lost focus on what we need versus what we want. I know people who have purchased 4,000 square foot homes and they can't afford to furnish or heat them. One acquaintance in particular kept trading up, believing the real estate market would make him money forever. A few years back he bought a townhouse in Baltimore for $1,200,000 and put about $250,000 down on that home. It is now on the market as a short sale for $750,000 and no one is biting. Ouch. I bet he doesn't feel real estate is a good investment.
If we get smart, we may realize that small and sustainable is smart. I hopped online to check out smaller new homes and I stumbled on this web site http://www.greenpoddevelopment.com/. The homes are compact modular homes that are energy efficient. Looks pretty clever to me since the average family will spend $990 on heating fuels according to the US Energy Information Administration. I got this information here http://www.ehow.com/facts_7907127_average-heating-cost-per-home.html
Being a New Englander, I can tell you that amount seems low as I know heating costs can easily be $200 to $300 a month here in a cold winter. My father is also likes to burn wood and coal to reduce his oil bill. I don't know too many people my age who think of chopping wood to heat their houses.
The other thing my parents did right is they didn't treat their home like an ATM. If they wanted to go on a vacation, they saved for it. They never pulled equity out to buy cars, send their children to school etc. In the long run, this was a wise move.
Are there things you have learned from your parents about buying a home? I guess having a group of more responsible and educated buyers is a good thing over the long run. Afterall, wouldn't it be great to have all generations feel that their real estate purchase was a smart investment?
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