As a Mortgage Broker and Real Estate Instructor I often play the role of a buyer and ask the agents in class "Why should I buy a home?" It's always amazing to me the answers I receive. Things like "It's a good Investment" or "because you can deduct the interest or my favorite because the house will go up in value!
For many of the buyers in today's market these answers, though tried and true, don't jell. Let's look at what a typical buyer thinks of these reasons.
It is a good investment - Say this today and a buyer will look at you like you have horns growing from your head. Every day we hear on the television, radio, the internet and the newspaper how home prices are going down. Why would someone believe that buying a home is a good investment. Yet time and time again that is what I hear in class.
Because you can deduct the interest! - This is another good one. How many of you would sign up for an tax write off where you give me $3 and in return It will give you $1 dollar back. That is a great deal isn't it! While this answer may suit someone above a certain level of income, according to a economist friend of my, only half of the people who could take the mortgage interest deduction by itemizing do so while the rest take only the standard deduction without itemizing.
Home values will appreciate. - Again current and past history shows that while this may be true most of the time, it is not always guaranteed. In fact, according to the book "The Sub-prime Solution" by Robert J Shiller, homes did not go up from 1929 till almost 1954. The US experienced zero appreciation for over 25 years. Home values do not always go up and sometimes they go down.
Let me tell you a reason why some one should buy a home, even in today's market.
Inflation Hedge and Freedom. Think of it this way. Even though gas prices have dropped from the summer highs how many of us would sign up for $2 a gallon gas guaranteed for a year? How about two bucks for 5 years or even better for life! That is what you do when you buy a house. You lock in a house payment for 30 YEARS! Think about it. How many of us would liked to lock in a price on something from 10 or 20 years ago. This one factor alone is a great reason to buy a home.
As a bonus, if you work at it you can pay off your house and reduce your housing costs even more. I recently read a book called "The Top 10 Distinctions between Millionaires and the Middle Class" by Keith Cameron Smith, ISBN 978-0-345-50022-9. In the book he talks about how millionaires strive for freedom, freedom of time, freedom from money worries and most of all freedom from debts that is eats at your income.
I think these are two excellent reasons for buying a home, even in today's turbulent market. It is time we get back to the core reasons of home ownership. Something the consumer can understand. The argument's for investment, tax deductions and appreciation are good as well but remember they are just icing on the cake!
Next blog topic: Why buyer's representation is critical today more than ever!
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