A recent article in my inbox listed 10 reasons you should own a home, but let's be honest, about half of them were, shall we say, specious. So here are five.
- Equity
Property appreciates in value. Just twice in the last century have housing prices crashed, and both were termed "Great" and not in a good way. One you don't remember personally, the Great Depression. It took three quarters of a century for us to repeat the those mistakes and hit the Great Recession. And all that did was set us back for a short time, as the lack of construction created a huge housing shortage of an estimated 23 million units nationally. While some areas recently saw slight price reductions with the advent of higher interest rates, that's not the case in Northwest Michigan. Over the last five years average home prices jumped 69.2% in our five-county region.
- Stable Housing Costs
No one is going to raise your rent. With a fixed-rate mortgage your house payment is protected from inflation. Of course when interest rates come down, you can refinance and either lower your housing cost or take out cash.
- Your Castle, your rules.
You want to convert the dungeon into a game room, own a cat, 2 dogs, parakeet, and a hamster, go for it. In some places you can even own chickens and a goat. Good luck convincing your landlord to allow a dog let alone a goat.
- Control Your Own Destiny
With a lease the stability lasts as long as the lease. When you own the home, you decide when to move, if ever. Ownership gives you a sense of stability, and owners tend to feel more a part of the community where they live. They are, in essence, invested.
- Surprising flexibility
You need your home to appreciate in value from 6-8% to recoup the cost of selling your home (taxes, commission, title costs, etc). Historically in Northwest Michigan, that takes about 2 years in a normal market, but since 2018 it's a year or less. Ownership means you are building slow and steady real wealth, not paper wealth. The difference? Banks will loan you up 90% of the value of your house at a FIXED rate. But just 50% of the value of your stock investments, at an adjustable rate. You have to move, you can use that equity to buy a new home and still keep your old home and rent it out for income. I did.
When you own, you have options and you are building wealth. When you rent, you are building wealth for the landlord, and they have all of the options.
If you have any questions about the information in this article, please reach out. I'm happy to discuss and provide source material.
