2011 is the year to buy your kid a home!

Real Estate Agent with Douglas Elliman Real Estate

Yesterday's blog spoke about the true value of home ownership and how we are getting back to those values.  Middle age parents who have owned a home understand its true value. A home has always been a good long term financial investment. However, homeownership also has many other benefits.

I was speaking to an experienced broker yesterday who is looking to help her college student daughter buy a home this year.  Other agents I have spoken to are experiencing the same thing.  They are meeting parents of young adult children who are strongly suggesting that their children take advantage of the low cost of homeownership available today. Some parents are helping financially and are even co-signing for the mortgage.

At first, I was a little surprised.  Many news headlines cry that the real estate market is horrible. However, after thinking about it, it made complete sense. Here's why:

Financially Sound

Let's look at the financial aspects of renting vs. buying. With house prices falling and interest rates still historically low, throwing money away on rent may not make sense anymore.

In an article from CNN Money earlier this week, they looked at this issue:

Perhaps not surprisingly, it makes more financial sense to rent than buy today in many U.S. cities...

But that may finally be about to change. Moody's chief economist Mark Zandi expects the trend to reverse this year in many major cities.

"By mid 2011 and certainly by end of 2011, buying will be superior to renting in most parts of the country," Zandi says.

As one person said to us recently: "Rents are like adjustable rate mortgages. They adjust often and most times they adjust upward!"

As a matter of fact, Fannie Mae just came out with their National Housing Survey which asked the question directly: Is this a major reason to buy a home?

The study broke up the answers into financial and non-financial reasons. The top four reasons and six of the top ten reasons were NON-FINANCIAL. The top four are below:

  1. It means having a good place to raise children and provide a good education.
  2. You have a physical structure where you and your family feel safe.
  3. It allows you to have more space for your family.
  4. It gives you control over what you do with your living space (renovations & updates).

You should not be surprised. Aren't these the same reasons our parents bought their home? Aren't these the same reasons we purchased our home?

These are the  same reasons parents have suggested their children buy a home. They want the same things for their grandchildren that they believed to be important for their children.

Bottom Line

Now that the craziness of this housing market is beginning to show signs of settling, people are getting back to the core values that families have always embraced. Homeownership is definitely high on the list. When real estate billionare John Paulson was asked about the market on Sept. 27, 2010, he said, "If you don't own a home, buy one.  If you own one home, buy another one.  If you own two homes, buy a thrid.  And, lend your relatives the money to buy a home."  I agree!



Statistic information used with permission from Keeping Current Matters.

Comments (3)

Randy Landis
Living in the Pacific - Tupelo, MS
Overseas Retirement Consultant

The plus side to all of this is that you finally get the kids out of the house! Couldn't resist, sorry. I agree that when you compare the costs of renting vs buying, you will get more bang for your buck on the buying side going forward.

Jan 07, 2011 01:13 AM
Pam Sitterly
CRS Magnolia-Tomball Texas

I just closed a transaction where the parents purchased a home for their adult child and her spouse. It seemed like the right thing for all of them.

Jan 07, 2011 01:26 AM
Katy Cardinale
Douglas Elliman Real Estate - Northport, NY

@Randy... my kids are still very young, but I'm already looking into purchasing a home for them.  By the time they are ready to take responsibilty for it, it will almost be paid off.

@Pam... I am hearing situations like this more often.  Thanks for the testimonial!

Jan 07, 2011 05:47 AM