Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
For the most part, home ownership is not a good investment no matter the location. Occasionally you can buy in just the right area and just the right style and your home can appreciate more than the average. But on average, home ownership is not where you should put your money if you're trying to invest it for either for maximum return or for a safe investment. Home ownership is where you should put your money if you want to own a home!
To show you what I mean, I have to tell you about my visit to Yale economist Robert Shiller's office a year ago.
Shiller -- who won the Nobel Prize last year -- is regarded as the world's foremost housing expert.
...
"Well, I think you have to reflect on the fact that it's done it before. Home prices declined for the first half of the 20th century [adjusted for inflation]. Economists discussed that back then. Why are they going down? The conclusion was ... of course home prices go down. There's technical progress. They are a manufactured good. Back in 1900, homes were handmade, you know, craftsmen. But now, in 1950, we can get all kinds of power tools and prefab. And [construction workers] were just better in 1950 than we were in 1900. So of course prices will go down."
Shiller also mentions that certain homes go out of style over time, dragging down prices. "What kind of houses will they be building in 20 years?" he wonders aloud. "They may have lots of new amenities. They will be computerized or something in some way that we can't anticipate now. So people won't want these old homes."
His animation peaked with a line I'll never forget.
"To me, the idea that buying a home is such a great idea is just wrong. They may very well decline for the next 30 years in real terms."
Real home prices may decline for the next 30 years.
I like owning a home, don't get me wrong, but I do it because I want the independence and the freedom to do what I want with it. Don't like those old kitchen cabinets? Rip 'em out! Want to paint the living room crazy colors? Go for it!
(We also don't live in a HOA neighborhood for the same reason, but that's a different thread.)
I like the rootedness of home ownership. This is my stake in my little piece of ground. I could see a future, though, when the kids are grown when we might sell and rent. Sometimes this little stake feels more like a ball and chain, y'know? So much stuff weighing me down!
I know many millennial who are taking advantage of first time home-buyer programs.
By the way, why are people forcing people to buy houses here? As far as I know, adults are capable of making the decisions that are best for them financially whatever the situation. What's wrong with someone not owning a house? This is America - nobody is forced to get married, have 2 kids, a house and a car. People can decide what makes them happy.
To echo what others have said, my house is not my retirement plan or investment - it's just a place for me to live that I chose. I'm still putting away money each month in my Roth IRA/company retirement plan.
Well I haven't seen any arm twisting going on lately, and they can't seem to build new apartment complexes fast enough around here. So certainly there are those that don't want the responsibilities of owning a home for various reasons and I understand that.
But when you pay rent, you get very little in return beyond a temporary roof over your head and are paying someone else's mortgage for them instead of investing in a generally appreciating asset that you own and could offer additional security and financial options during retirement years. Investing in real estate is in most cases less risky than more volatile 401k/IRA/Stock investments but with slower growth rates. I own my home and no one can take that away from me.....as long as I pay the property taxes.
But when you pay rent, you get very little in return beyond a temporary roof over your head and are paying someone else's mortgage for them instead of investing in a generally appreciating asset that you own and could offer additional security and financial options during retirement years. Investing in real estate is in most cases less risky than more volatile 401k/IRA/Stock investments but with slower growth rates.
Quote:
Originally Posted by poppydog
Sometimes this little stake feels more like a ball and chain, y'know? So much stuff weighing me down!
I think the flexibility part is the one thing that has been touched on briefly that is a bigger issue to millennial. Buying a house is a permanent thing - the millennials that I know are largely transient and not rooted. They move from job to job, city to city so buying a house somewhere may be a negative in that you get stuck in one place and are limited in terms of opportunities (whether that's quality of life related or job related etc..). Not to mention hoping that the real estate market is strong when you want to sell so you can even sell my house.
Well maybe so ..... I just know that by paying mortgages over the years instead of rent (both probably being about the same) I will be leaving my 3 kids about a $100,000 each just in home equity when I pass.
I hope it works out even better than that for you, but you just never know.
Generally speaking, there are other ways of investing that are better than owning a home. If millennials and younger folks are able to swing enough dough to set some aside in their Roth IRAs, etc, like pierretong mentioned, then that is definitely the way to go.
I know when my parents died (not rich folks, just middle class, dad was a salesman, mom worked for the school system) my sibs and I inherited significantly more from their investments than we did from the sale of their house, which they had built in 1957 for some paltry 5 digit sum and we sold for about 10 times that.
I am very, very far from a financial guru, in fact, it's one of my biggest anxieties. But based on the stuff I've read, if millennials don't want to own a home I don't think that's a big deal at all. They should save in those IRAs though! And invest! That's a big deal.
For the most part, home ownership is not a good investment no matter the location. Occasionally you can buy in just the right area and just the right style and your home can appreciate more than the average. But on average, home ownership is not where you should put your money if you're trying to invest it for either for maximum return or for a safe investment. Home ownership is where you should put your money if you want to own a home!
It's all about jobs. Where there are jobs and a good economy, home prices will appreciate (really, it's the LAND ie location that does, not the structure) as more people move into an area. This is ONE MAJOR REASON I purchased a home here. Robustness of the economy sold me. IT, Biotech, medical, higher education, capital city of the state. Lots of good reasons. Same reason Raleigh makes an excellent rental market.
I personally know people who live in the Midwest where there aren't many jobs, and the economy is shrinking. Towns and cities are dying. It's very sad. Their home values have dropped over time.
Approach home buying as an investment. Purchase in areas with population growth not declines. Purchase in areas with a robust economy that doesn't depend on a major employer. Purchase a home that the average median purchaser can buy.
Be smart about it, and it can make a lot of sense. Some people just got lucky. That happens too.
Home buying is greatly oversold by far too many people. There are many reasons but just a few
1. Tax deductibility of interest/property tax is oversold not understanding the standard deduction
2. Transaction costs to buy and sell are often ignored in the conversation
3. People most often buy more than they would rent.
Younger folks in an working career that hasn't matured can be greatly hindered by owning either by limted mobility or be cost to sell and move. The idea that buying is best or renting is throwing money away is simply lacking in education.
Wow, any talk about "people of different generations" is almost like asking for a political rant. Millennials are lazy punks. Baby Boomers ruined the world. Yeah yeah yeah, whatever...
I'm a Boomer, and all 5 of my kids are Millennials. All of us are homeowners.
- Part of the reason they all own homes is because, in their contexts, it made sense. That is not the case for all Millennials.
- Part of the reason is because I prepared them with both knowledge and home-ownership skills.
- Part of the reason is because I provided each of them with a downpayment on their first houses.
I do want to caution y'all Millennials about ripping on us Boomers too much. When I was in my mid-20s, looking to buy my first house, mortgage interest rates were 11.5%, and you either had a 20% downpayment or you didn't buy a house. Today, some mortgages can be had at 2.75%, and many houses can be bought with a 3% downpayment or less. The one thing that has not changed is that you have to be VERY careful about what you're doing.
The bottom line is that not everybody should be a homeowner.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
