Home Ownership is Still a Good Idea

Share

Although a home may not make a terribly good investment, I still think homeownership has its advantages. I just filed my income taxes, and I took it in the throat because all I had was the standard deduction, putting me in the 25% tax bracket. In addition to a tax shelter, a home offers the following advantages for me:

Privacy: I don’t have to share a wall, a yard, or a front door with anyone
Garage space: rental units that come with a garage go first and at a premium
Yard space: since I have dogs and want a garden, this is a must
Equity: since I can buy a home for less per month than I could rent comparable space, I might as well be earning equity so that I can get some of that money back when I sell
Tax leverage: I would love to get back into the 15% tax bracket, so if I’m going to be spending the same amount of money as a rental, at least I can use a home to get some of my own money back from the federal government
A place of my own: if you are working towards owning a home, some day it may be yours. In an apartment, you can be evicted for any reason any time, but kicking you out of your house if you’re paying on time is more difficult.

So, I really hate articles like this one I read yesterday, which claim that home ownership isn’t a good idea. It may not be a panacea, but it has myriad advantages.

On to address the author’s claims:
Houses produce lousy returns compared to stocks.
If you buy a home intending to use it to make money, he’s right. Houses are extremely illiquid, and they tie up money. However, as I said before, I can own a home for the price I’d pay in rent, so why pay rent and get a negative return?

House prices will continue to fall
House prices will rise some day. Everyone needs a place to live, and those who can stay where they’re at until the market recovers will be just fine. This is only a problem if you’re looking for ROI from buying a home.

Houses today are built to waste money
This isn’t so much a function of the homes as much as it is a function of pop culture. Keeping up with the Jones’ may be your thing, but I’m looking at a home in which I can raise my kids (assuming I ever have any) to adulthood. I don’t own much stuff (everything I own fits into a 10x10 storage unit), and I’m intending on initially at least getting a roommate to help offset costs. This way, my home becomes an income generator, even if it just compensates for the increased costs. Also, HVAC units in all the apartments I’ve rented were poorly maintained and cheap models. I do not need a castle, but I don’t need the antiquated systems put in by rental landlords either.

Big houses=higher taxes
You can mitigate this by buying what you need and not what you want. Since I live by a conservative fiscal mantra, I’m buying for future expansion but also way within my means. Also, taxes will go up no matter what you do, especially under the current administration, and you’ll pay more whether you rent or buy, because, as the author points out, renters pay as part of their rent some portion of the landlord’s total tax. As taxes rise, so do rents.

Neighborhoods change
Yes, they do, and they can change just as much whether comprised of homes or comprised of apartments. This is a nonsequitor. My dad works with people who have stayed in the neighborhoods and seen the demographics cycle. If you buy long term and lock in low prices and low rates, then a home makes more sense than renting. Most people do live vehement lives full of upheaval, and so renting may make more sense, but don’t let these people talk you out of buying homes.

That’s just going to prolong the housing crisis.

To answer these critiques, I recommend The Two Income Trap, which I thoroughly enjoyed and for which endorsement I have received zero compensation (yet).