![]() ![]() ![]() Once again, you have to do your math, but the part of your mortgage payment that goes to principal repayment isn't a cost. But will you save that $400 for your future? A lot of people won't. If you can rent an apartment for $2,000 month instead of buying one for $2,400 a month, renting may make sense. Equity in a home is another way of linking part of your portfolio to the long-term growth of the economy–if it happens–and still managing to sleep at night.Ĩ. One lesson from the last few years is that stocks are incredibly hard for most normal people to own in large quantities–for practical as well as psychological reasons. But if the economy does surprise us all and start booming, sooner or later real estate prices will head up again, too. No, your home isn't the stock market and you shouldn't view it as the way to get rich. That also makes homeownership look a little better by contrast. In the recent past, inflation-protected government bonds, or TIPS, offered an easier form of inflation insurance. That's valuable inflation insurance, especially if you're young and raising a family and thinking about the next 30 or 40 years. But studies by Professor Karl "Chip" Case (of Case-Shiller), and others, suggest that over the long-term housing has tended to beat inflation by a couple of percentage points a year. Generally speaking, if you want the best home in the best neighborhood, you're better off buying.Ħ. Once again, this is a case by case issue: In Miami right now there are so many vacant luxury condos that owners will rent them out for a fraction of the cost of owning. In many parts of the country it can be really hard to find a good rental. ![]() With Little to Do, Home Builders Focus on Quality It's the first thing people do when they buy." It was a small sign that said something big. "You can tell the ones that have been bought," said my local guide. ![]() Thatcher had just begun selling off public housing to the tenants. Many years ago, when I was working for a political campaign in England, I toured a working-class northern town. You'll feel better about your own place if you own it than if you rent. Few landlords are so indulgent for renters, these types of changes are often impossible. You can move the walls, build an extension–zoning permitted–or paint everything bright orange. You can have the kitchen and bathrooms you want. But many people will find that these tax breaks mean owning costs them less, often a lot less, than renting. The breaks are more valuable the more you earn, and the bigger your mortgage. You'll only get the income tax break if you itemize your deductions, and many people may be better off taking the standard deduction instead. And you'll get a tax break on capital gains–if any–when you sell. You can deduct the mortgage interest from your income taxes. And if we get deflation, and rates fall further, you can refi.ģ. If inflation picks up, you won't see these mortgage rates again in your lifetime. That drop slashes your monthly repayment by a fifth. As recently as two years ago they were about 6.3%. What's not to like? These are the lowest rates on record. You can get a 30-year loan for around 4.3%. Case-Shiller since then: Down 18%.īrett Arends discusses why he thinks now is a particularly good time to buy a home. Where is fair value? Fund manager Jeremy Grantham at GMO, who predicted the bust with remarkable accuracy, said two years ago that home prices needed to fall another 17% to reach fair value in relation to household incomes. It doesn't really matter so much in the long haul. Will prices fall further? Sure, they could. And prices have come down a long way– about 30% from their peak, according to Standard & Poor's Case-Shiller Index, which tracks home prices in 20 big cities. We're four to five years into the biggest housing bust in modern history. Most of the other buyers have now vanished, as the tax credits on purchases have just expired. So here are 10 reasons why it's good to buy a home.ġ. "Home Sweet Home," declared its cover then, as it celebrated the boom and asked: "Will your house make you rich?"īut it's not enough just to be contrarian. After all, at the peak of the bubble five years ago, Time had a different take. 6 cover of Time magazine: This is what capitulation looks like. But when Time magazine starts running covers that declare "Owning a home may no longer make economic sense," it's time to say: Enough is enough. Sure, maybe there's more pain to come in the housing market. Enough with the doom and gloom about homeownership. ![]()
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