Your Home is NOT an Investment
Somehow, during the real estate boom, the prevailing thought in society became that your home was an investment. It kept appreciating and you could draw equity from it for other things. Or, you could flip it in two years and go by an even higher priced home with the money you made off of the sale of the former.
Here's a news flash. Your home is NOT an investment. Here's why:
Your home is not easily liquid, as investments should be. When you need to cash it out, you need to find a buyer for it and also need to find another place to live, which can be costly. When you sell stock, you just sell it and get the money. No moving necessary.
Your home is serving a purpose. The reason you bought it is to have a roof over your head. Yeah, in the long run, you will build equity in it, but again, it's meeting a primary need, SHELTER. Even if you live in the home for thirty years, by the time you sell it, you will need to find another place in which to live, which will likely eat up that equity.
Buying a home is still a sound financial and life decision. You lock in your housing payment and the place you will call home. You get a mortgage interest deduction on your taxes. Rent can't do that. And you know rental rates only increase over time.
It's a nice benefit to build equity over the years in a home, but let's not lose sight of what you are buying when you buy property. You are buying a place to live. Yeah, it's the largest purchase you will ever make. But if you have ever leased a home, and seen the annual total on your rent, you know that no matter where you live, housing will always be your largest expense. Might as well lock in the payment and have a place to call your own. Just remember, it's not a blue chip stock that is going to wildly appreciate and put you on easy street.