The millennials are the newest generation to reach adulthood and many of them look at the American Dream quite differently than generations before them. Being a real estate agent, when I meet people, the conversation is often about real estate. I have had conversations with young professionals who are doing quite well and homeownership seems to be the furthest thing from their mind. Often times these will be young families with two incomes. When did this change?
This is a generation that grew up in a different world than that of those who are older. They saw the housing bubble that was caused by irresponsible lending practices and high risk loans. They saw that bubble burst, housing values fall and homeowners with negative equity. This resulted in a housing market filled with short sales and foreclosures. The millennials watched as their parents’ credit got destroyed.
Real estate is still a sound investment and owning your own home is a particularly good investment where the risks are even lower. Home loans on owner occupied property have lower interest rates than investment rentals or commercial real estate. There is also no need to worry about vacancies or bad tenants. If you rent a home you are still making a mortgage payment, is just not yours.
When you put 20% down on your home, you are leveraging your investment at a ratio of 5 to 1. This means that when your home goes up in value 10%, you just made 50% on your initial investment. When you put less than 20% down, you leverage your investment even more, but the money you borrow becomes more expensive.
You would be hard pressed to find a long term investment that pencils out better than the investment of your own home. It would likely be impossible to find an investment that is more rewarding then home ownership.
See more at Home Ownership as an Investment
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