Buying a home is part of the American dream. However, some experts have discouraged people from buying homes, citing the housing bust and our increasingly mobile society.
In 2008, home prices plummeted after prices were driven up by predatory lending practices and unrealistic home prices. And although, as of January 2016, home prices were rising at a rate twice that of inflation, according to the S&P/Case-Shiller U.S. National Home Price Index, most experts believe government regulations implemented after the crash will prevent another economic disaster.
The concern about mobility may be justified in general. Workers are with their current employer for a median of 4.6 years, and for workers between ages 25-34, only 3 years, according to statistics by the U.S. Department of Labor.
Is a house still a good investment?
Experts believe home ownership is a productive investment for millennials. And many are following their advice: Millennials comprise the largest group of home buyers at 35% of all purchases, according to the National Association of Realtors. The median age of home buyers was 30.
Here’s why many believe home ownership remains a good investment:
- A home is a physical asset that can’t “disappear” like stock profits. If you accrue no other benefit, you still have a place to live.
- Homes are protected from inflation. In most cases—and particularly in West Central Ohio—houses usually maintain their value or appreciate. Home appreciation for the last year has been 7.76% in Mercer County and is down only 0.9% in Darke County.
- Mortgage payments are an investment in your future. As you pay down your mortgage, you gain equity.
- Homeowners receive tax breaks on mortgage interest and property tax. Plus, you may qualify for the capital gains exclusion when you sell your home. You may also be able to take a home office deduction. (Please Note: Taxes are constantly changing. While this blog is meant to help you best manage your finances, it’s for informational purposes only and shouldn’t be seen as tax advice. Talk to your tax professional if you have questions about your taxes.)
- Housing prices are low locally. The average price per square foot in the U.S. is $123. Compare that to the cost in Celina and Greenville.
- Interest rates are low but are predicted to rise in 2017.
- Homeownership provides benefits for your children and family. A study from The Ohio State University showed that owning a home leads to a 13 to 23% higher-quality home environment. Children living in owned homes attained math achievement scores up to 9% higher, reading achievement up to 7% higher and behavioral problems 1 to 3% lower than children living in rental properties. And while that may not be a monetary investment, it is an investment in your family.
- If you borrow at a fixed rate and interest rates increase, you are paying off your future debt with cheaper (current) currency.
- If you borrow at a fixed rate, your costs are stable. Rental costs are increasing nationwide, and as anyone who has looked for housing in Darke or Mercer counties has discovered, rental properties are at a premium.
- The Welcome Home Program provides up to $5,000 for qualifying home buyers.
What can you do to ensure your house remains a good investment?
Get a fixed-rate mortgage to reap many of the benefits of homeownership.
Maintenance and upkeep are always important. If you don’t take care of problems, you may lose equity as your home’s value declines.
The longer you keep your home, the more valuable it becomes. Each year brings you more equity.
As your community bank, we’ve been advising your neighbors for 125 years. Contact your local Mercer Savings Bank office for a mortgage application or other information online or by phone at 877-672-4543.