Is Real Estate Really Dead?

A recent NY Times article titled, "Housing Fades as a Means to Build Wealth, Analysts Say,” came out with gloomy statement: “…many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg.” The article goes on to quote one silly economist as saying, “People shouldn’t look at a home as a way to make money because it won’t.”

 

Now, honestly, the real estate market took a heavy hit and is reeling from the blow, but it will recover. We may never see increases in home equity that marked previous years, but over the long term, owning your home is still a good investment.

 

 

When you buy a home, it comes with its own piece of land – a nonrenewable resource. They can manufacture new cars and re-rent apartments to new tenants, but they can never make more land. That is partly why a car loses value as soon as you drive it off the dealer lot. Over years, that car will eventually be worth next to nothing. That will never happen with land. Its value may grow slowly, but it will grow.

 

 

Paying rent is like throwing money away. Landlords have been called many things, but rarely stupid. The reason they own property and charge other people to live there is because it makes sense. Paying rent is like pouring money down an open drain. When you have a mortgage, you make payments equivalent to rent and are making progress toward complete ownership. That is putting a plug in the drain.

 

 

What is the value of freedom? When you own your home, you have the freedom to remodel and renovate as you see fit. If you want a pet, all you have to do is bring one home with no extra security deposit or rate increase in rent required. You can have friends stay with you for as long as you want without being considered extra tenants.

 

 

Buying a home is a safer bet than playing the stock market. You can invest a lot of money in stocks, and with one turn in the market it can all disappear. When you invest in a house, you come home to those tangible results every night. Barring any man-made or natural disasters, you can do that for the rest of your life. And for those disasters, homeowner’s insurance can help cover your losses.

 

A home serves more than one purpose. Along with being an investment, a home provides safety and security for you and your family. It gives you a place to socialize, sleep at night, and store your other belongings for safe keeping. No other investment can say that.

 

 

Owning your home can also act as a fall back plan if times get tough. You can get a roommate to help offset costs. You can refinance when interest rates go down. You can take out a home equity loan. You can also take advantage of tax breaks for homeowners on your annual tax return.

 

 

And once that house is paid off, it’s a free place to live. You won’t get that with a condo or an apartment. Retirement years will no doubt offer reduced income. A home that is paid for helps seniors adjust to the new life style and means they can save less money for their retirement. 

 

Home ownership does involve a level of responsibility not faced by renters, but for the right person, the investment is well worth the reward. Real estate is not dead. It is just taking a nap.