Is Homeownership Overrated?

In real estate on November 27, 2010 at 7:01 am

These past couple of years have not been the easiest of times, with the bursting of the housing bubble and the crashing of the banking industry, and sub-prime mortgages that turned people who had no business being homeowners – into homeowners.

The bad times have made for plenty of bad press, and that has left some people questioning whether the American dream is really all it’s cracked up to be. The controversy really came to a head last month, with a Time magazine’s cover story titled “Rethinking Homeownership: Why owning a home may no longer make economic sense.”

Well, let’s address the main complaint in the article, namely, that over the past century, the government has invested too much in an economic model that is built around encouraging home ownership, and that Americans have, over time, been sold a bill of goods that somehow has fallen short of expectations.

Now, if you’re one of the unfortunate homeowners who have seen your home mortgage go underwater, or, who has, heaven forbid, lost your home to foreclosure, we can certainly sympathize and understand why your current view of homeownership might be less than positive.

But that view is also woefully short-sighted. It’s more than a little ironic that the same American society that has put so much faith in smart, safe, long-term real-estate investment is now clashing with its “evil twin”, the short attention-span culture that expects and even demands a quick return on investment, or even worse, a fast buck made on no investment at all! It’s a battle of the tortoise versus the hare ramped up for the 21st century!

We’ve been so busy flipping homes and focusing on making bigger and faster profits over the past decade, that some of us have forgotten there are not only ups but also occasional downs for any type of investment.

Do you really think that underwater mortgages are just a phenomenon of the past couple of years? Homeowners have been facing the same challenges forever , they just never received the same amount of attention, because, over time, most of these situations work themselves out.

And yes, it’s clear that mistakes were made. Too many well-meaning and hard-working people were lured into making deals they had no business making, accepting the sales pitches of lenders who never warned them of the dangers of buying homes with no money down, then being saddled with monthly payments they could barely afford, even when times were good.

Those mistakes are being corrected, because the truth remains that the model still works for most Americans. Money invested in real estate today will appreciate in value over time, building equity and buying power for its owner, and eventually, a healthy return on that investment. If handled responsibly, with patience and without short cuts, owning a home is as safe and sensible an idea as it has ever been.

And to drive that point home, we’ll close with a list of 10 reasons to buy a home. In fact, the Wall Street Journal created this list as a rebuttal to our friends at Time Magazine.

1. You can get a good deal. It’s a buyer’s market.

2. Mortgages are cheap. The lowest rates ever.

3. You’ll save on taxes.

4. It’ll be yours. You want a purple bathroom? Go ahead. You own it!

5. You’ll get a better home. In many places, it’s tough to find a nice place to rent.

6. Protection against inflation. Your mortgage payment remains steady, but rents rise.

7. It’s risk capital. When the economy improves, so will home prices, and you’ll already be in the market.

8. It’s forced savings. You’re building equity, whether you like it or not!

9. There’s a lot to choose from. There are 4 million homes for sale in the US. One is bound to be right for you.

10. Sooner or later, the market will clear. The economy will improve, demand will increase, supply will fall, and life will go on.

And then, of course, you’ll really be glad you bought a home.

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  1. […] This post was mentioned on Twitter by John Carmine, Wenceslao Fernandez. Wenceslao Fernandez said: Is Homeownership Overrated?: […]

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