Real Estate & Financial Planning
Homeownership will always be a part of the American Dream. There are advantages to owning your own home that far transcend any economic impact. However, today I want to look at several of the financial advantages of homeownership.
1. Buying is Cheaper Than Renting
The results of the latest Rent vs. Buy Report from Trulia show homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States. The report reveals that:
“Interest rates have remained low, and even though home prices have appreciated around the country, they haven’t greatly outpaced rental appreciation…Nationally, rates would have to reach 9.1% for renting to be cheaper than buying. Rates haven’t been that high since January of 1995, according to Freddie Mac.”
2. Homeownership “Forces” You to Save
According to SavingAdvice.com, homeownership is a great way to save. Their advice is quite simple:
“Homeownership is a ‘forced’ savings account because you own the home, you have no choice – that monthly housing cost has got to be paid no matter what…Homeownership can be an outstanding way to force yourself to be more frugal in the rest of your spending so that you can save and build equity in your home.”
3. Homeownership Offers Several Tax Deductions
According to the Tax Policy Center’s Briefing Book – “A citizen’s guide to the fascinating (though often complex) elements of the federal Tax System” – here are 3 tax advantages to homeownership:
- Homeowners who itemize deductions may reduce their taxable income by deducting any interest paid on a home mortgage.
- Homeowners who itemize deductions may also reduce their taxable income by deducting property taxes they pay on their homes.
- Taxpayers who sell assets must generally pay capital gains tax on any profits made on the sale.
4. Experts Expect Home Price Appreciation to Continue
Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts, and investment & market strategists about where they believe prices are headed over the next 5 years. They then average the projections of all 100+ experts into a single number.
Over the next 5 years, home prices are expected to appreciate 3.22% per year on average and to grow by 17.3% cumulatively, according to Pulsenomics’ most recent Home Price Expectation Survey.
Real Estate Bottom Line
Purchasing a home now may prove to be a sound financial decision for years to come. As Warren Buffet said, “When others are greedy, be fearful. When others are fearful, be greedy.”