Is Home Ownership Overrated?

By
Real Estate Broker Owner with Global Property Systems Real Estate DOS NYS #10491202606

Derek Jeter's summer home, Greenwood Lake, NY.After being forced out of my home on the Hudson River by Hurricane Sandy and finding myself in a rental apartment  I've been rolling around the question, "Is owning a home really a good investment?" Robert Shiller, a Yale professor and co-founder of the Case-Shiller Home Price Index, is famous for making provocative comments on house prices. He recently delared on a Bloomberg TV interview that home ownership was "a fad...that took hold in the early 2000's."

Home ownership, in my view, was never a fad, even in the go-go days of the early 2000's. My parents whole heartedly embraced home ownership as both a dream and an investment. They owned our home and we lived in it for 27 years. They both worked, paid it off early, lived in it for years without mortgage or rent payments, and sold it at a profit of 460%. I think even Mr. Shiller could appreciate an investment like that.

There are several reasons I see for owning a home as an investment, probably the biggest investment a person can make. Owning replaces an expense, rent. Renting offers no potential for a return on your investment. Some experts state that over the last thirty years, renting has been cheaper than owning, and that if you invested the difference between your rent and your mortgage payment you'd be better off financially. The problem with that argument is that this isn't thirty years ago. In today's market, renting is MORE expensive than owning. And the reality is, very few people actually would invest that extra money if they had it.

The other big advantage to home ownership is its tax implications. Cashing in $250,000 in profits on Microsoft stock carries with it a substantial cost in capital gains taxes. Selling a home, while not as liquid, is excluded from capital gains taxes up to the $250,000 limit. If you and another person owned the home jointly but filed separate returns, each could exclude up to $250,000 in capital gains.

But here's the wrinkle I've been thinking about, now that I'm a lot closer to retiring age than I am to voting age. I think it makes sense to own the home that's where your heart is, and rent the home near where you work. In other words, buy where you would likely retire. Use it as a vacation home, a summer place, or rent it out for added income. In today's economy, where fifty is the new unemployed and where today's employee could be transferred or, worse, looking for work tomorrow, investing in a second home as a "retirement" place seems like a good idea if you can swing it. It carries all the benefits of owning a home, and will always be there as a fallback when you need it.

What do you think? Is home ownership overrated? Remember, you can't live in your IRA. Owning a home as an investment makes financial sense for many Americans today.

 

Originally posted at To own or not to own; that is the question

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Rainmaker
648,032
Rob Arnold
Metro Orlando Full Service - Investor Friendly & Foreclosure Realtor
Sand Dollar Realty Group, Inc.

Homeownership is clearly not a fad or over-rated.  People have been owning homes for thousands of years.  Not only is a decent long-term investment - especially compared to paying rent, but it also helps stabilize families.  The tax implications are yet another thing.

July 24, 2013 12:19 PM
Rainmaker
385,462
Tni LeBlanc
JD, MA, REALTOR, CalBRE # 01871795
Mint Properties, Tni LeBlanc (805) 878-9879

I like your idea of renting for work and buying for your retirement. 

 

Makes sense in this new world.

July 24, 2013 01:26 PM
Rainmaker
239,184
Travis "the SOLD man" Parker; Associate Broker
email: Travis@theSOLDman.me / cell: 334-494-7846
Team Linda Simmons, Enterprise, AL 36330

We've been thinking about building a home in the country on land that my wife has. About a 15 minute from here, and a 30 minute drive to the office (which I only go to a couple of times a week anyway - THANK YOU INTERNET).

July 24, 2013 05:18 PM
Rainmaker
565,341
Hella Mitschke Rothwell
Hawaii & California Real Estate Broker
(808) 226-1095 or (831) 626-4000
Just look at the faces of first time homeowners, proud. A place to have their possessions that they can stay forever if they want.
July 25, 2013 08:26 AM
Rainmaker
261,048
Paddy Deighan JD PhD
Paddy Deighan J.D. Ph.D

I think that home ownership is very wirthwhile IF someone is going to stay in an area for a period of time. if someone is going to move in a few years, it is best to rent...especially if the mortgage interest deduction goes away

July 30, 2013 03:15 PM
Anonymous
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Rainmaker
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Vanessa Saunders MBA MIMC CIPS FIABCI

From Manhattan to the Catskills of New York
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Additional Information

Vanessa Saunders MBA, MIMC, CIPS, is based in Piermont, NY. 12 miles north of Manhattan, on the Hudson River. Broker owner of GPS real estate (Global Property Systems Real ) the company's team of local agents covers the Lower and Mid-Hudson Hudson Valley market area, including Manhattan, Westchester, Rockland, Orange, Ulster, Sullivan and Dutchess counties of New York. As a Certified International Property Specialist and Member of FIBCI (The International Real Estate Federation) Vanessa specializes in marketing her team's listings globally. She is successful in attracting investors, relocation executives and buyers, in all price ranges, not just from local markets, but global markets. The GPS team of full time professional multilingual Realtors are adept in assisting buyers find the ideal property and negotiating successful transactions and investments. GPS real estate is a full service brokerage providing full relocation and EB-5 and E-2 visa assistance or simply moving you across town. You can reach Vanessa at (845) 848 2218. Members of the National Association of Realtors New York State Association of Realtors Hudson Gateway MLS Manhattan MLS NYS MLS FIABCI