The current market has people rethinking the dream of owning a home and, instead, exploring the tradeoffs between renting and buying a home.
Even in the current environment, financial advisor David Jackson thinks that despite the risks of the real estate market a house can be a positive in the long term.
"You're going to have to pay rent to somebody anyway so, you're basically paying it to yourself and building up that equity. Makes it a good investment" he says.
Nolan Keim, an associate wealth advisor, points out that if you purchased a house in 2011 for $300,000 and sold it this year for $450,000, you would see an annualized gain of about 4.14% over the 10 years.
However, during that same decade the S&P 500 was up 14.17% which according to Keim shows that, "if your main purpose is to live in that [house] long term, which in most cases it should be, it really falls under that personal use asset rather than that investment asset."
There are a number of myths when it comes to homebuying. The biggest is if the bank approves the mortgage you can afford it. The bank may only be looking at your income and not at all the expenses you may have.
Another myth is home ownership is more expensive than renting. On the whole that is true admits Keim but says there is worth in having more room in the home and the choice of neighborhood. "There is value in other things that you don't get while renting."
If you're thinking of purchasing a home, Jackson reminds prospective buyers, "If you're not going to be in a home for at least three to five years, with closing costs and moving expenses and all that, you may end up losing money on the deal," adding, "You have to think it all through."
- David Jackson, financial advisor, Modern Horizons Wealth Advisors
- Nolan Keim, associate wealth advisor, Mariner Wealth Advisors
The information presented by our guests is for informational purposes only and should not be construed as a recommendation or advice related to your personal situation. Please consult with a professional prior to making any financial decision.
