Rising mortgage rates and high home prices have thrown the traditional “buy a house, build wealth” equation into disarray. Whether it’s a sound investment now depends on a complex interplay of your individual circumstances and financial objectives.
A user asked the forum, “Is a house even a good investment right now?”. Here are some responses he got!
A HOME TO LIVE IN
“If a home to live in, don’t consider that an investment. Buy it if the numbers make sense for your situation. Don’t over-extend yourself and stress test your purchase (e.g., is it manageable if you lose your job, have a sufficient emergency fund, etc.)
From an investment property standpoint, now is not a good time.”
PRIMARY RESIDENCE IS NOT AN INVESTMENT
“Primary residence is not an investment. While it can contribute to building wealth, the goal of buying a house is to live in it.”
HOME-OWNERSHIP NOT ALWAYS THE BEST INVESTMENT
“If you own the property you live in, that’s mostly consumption, not investment. It could turn out to be a good investment, but there’s no guarantee, and you shouldn’t analyze it as such.”
BUY IF YOU CAN AFFORD IT
“It’s a good idea to buy if you want to buy and can afford the repayments. Ignore all the other stuff.”
HOME-OWNERSHIP A HEDGE AGAINST INFLATION
“You have to live somewhere, so a house is partially an investment and a lifestyle choice. Rent goes up; mortgage payments don’t.
Inflation is with us, whether it’s obvious or hidden. The government doesn’t stop “printing” money, so you need some assets to keep up with inflation.”
DEPENDS ON YOUR LOCALE
“Depends on your locale. For most people in the USA, the math says it’s cheaper to rent.”
HOUSING IS ALWAYS A GOOD INVESTMENT
“Housing is always a good investment because :
You have a place to live. This is important because life is about living, not just about ROI.
Housing prices go up significantly over time, always.”
HOME PRICES TO SKYROCKET WHEN INTEREST RATES DROP
“Here is my thought process.. the homes cost a lot. Interest rates are high. What’s going to happen when the rates go down? People will flood back into the market like we have never seen before. Prices will skyrocket when rates go back down to the 4s.”
PERSONAL HOMES ARE A LIABILITY, NOT AN ASSET
“Personal homes are a liability, not an asset. Depending on the eternal inflation of home prices is, while historically reliable, gambling at the high stakes table.
Unless you find a way to make your home an income-producing property (i.e., a home office that saved more than a rental would) it should not be considered anything but a low liquidity, somewhat volatile store of wealth.
The harsh reality that home prices need to take a sharp decline for the majority of younger generations to be able to afford homes now is something existing homeowners refuse to acknowledge and fear ever happening.”
CONSIDER YOUR FINANCIAL GOALS
“Another thing to consider is what you pay for the same property. If there is enough savings, you can stash that money into an ETF or mutual fund that tracks the S&P 500.”
DEPENDS ON HOW LONG YOU WOULD LIVE THERE
“I think it depends on how long you would live there and your alternative housing options. If you are confident you could stay in the house for ten years, I think everyone would expect prices to be higher and rates to be lower, especially if the other option is renting for that period. Even with high rates you’ll build equity every month and get tax breaks in the interest.
Index funds are a good option, along with money market accounts. I can’t remember being able to get 5% on a money market in my adult life.”
WAIT FOR A YEAR
“I’d say wait a year…..but nobody knows for sure. You are gambling either way. If you plan on staying in the house for at least seven years, you’ll probably be ok. It also depends if you’re living at home or renting.”
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This article was originally published on Mrs. Daaku Studio.