Copyright © Jaye Hallman. All rights reserved.
A graph reflecting home values over the last 60 years will show you cyclical ups and downs in the real estate market. We all painfully remember in 2006 when the market crashed. Millions of homeowners were instantly left with no equity in their homes and left in peril. These troughs in the real estate market did not foster much confidence in the idea of owning a home. In fact, after many people short-sold or foreclosed on their homes they did not jump back into the real estate market. Rather, to avoid the temporary pitfalls of owning, they opted to rent and have continued to do so. This article aims to show why home ownership still outweighs renting and how it will kick start your foundation phase of accumulating wealth.
It is true that for the short term, buying a home is costly and does not immediately put money in your pocket. Your down payment, closing costs, and moving expenses will leave your bank account feeling bare. But after approximately 4 years of owning a home, your mortgage balance starts to decrease and your equity begins to builds. This growth in equity coupled with deducting your mortgage insurance at tax time means that you start to shelter your money from Uncle Sam.
The housing future for a renter is always subject to the landlords mercy. The rental rate and duration of your stay is in continually unstable. As the market has shown, rental rates continue to rise and renters can expect a minimum of a 5% increase in rental rates year after year. Landlords may also decide to sell a home out from under a renter or choose to rent to another at the conclusion of a lease term. And while some may like the idea of having a one year lease to be able to stay “on the move”, others equate moving to medieval torture. In addition, those with children fear that they will not be able to find another suitable rental in their children’s school district. Or commuters worry that their drive into work will be exacerbated when they need to move into a rental that is farther out. Owning allows for stability which ultimately results in less stress and an overall sense of security.