Is buying a home a good investment?

Why Your Mortgage Won't Make You Rich


Research at the Massachusetts Institute of Technology even suggests home owners may end up earning less over the course of their lives than renters do. The reason? Renters can more easily move for good jobs. It may sound fanciful, but it's not completely ridiculous. Just ask someone who owns a home in Detroit.

I'm not arguing that buying a home is a bad financial move. My wife and I own. But we bought after running the numbers and comparing the annual costs with renting. We didn't gamble on big capital appreciation to help us out.

Nor am I denying the other benfits of ownership. Owning your own place can be a great feeling.

But if you are trying to decide whether to rent or to buy, and you take a purely financial point of view, it's risky to rely on brisk home-price appreciation to swing the argument.

The real benefits of home ownership are any capital appreciation, plus the imputed rent, minus the effective cost of the mortgage and property taxes, other costs, and the return you could earn on your down payment elsewhere.

That's a complex figure, and it varies widely. But if your home's appreciation is lower than the annual cost of borrowing, as it has been for many over the last 20 years, leverage is not much of a friend.

Comment: Short term ownership doesn't work. Long term probably is a good value.


  1. Although it would be nice to own a home for a number of reasons, my wife and I are choosing not to for now. Mainly because I am of the small minority that believes a home is a liability not an asset, but renting a home is just an expense. Plus it gives us a lot more flexibility in life. I don't have to fix or replace anything if it breaks. I just call up maintenance, and they do it. I don't have to worry about mowing, watering, the siding, the roof, etc.

    But to each his own.

  2. Most of them were thinking buying real estate is still a good investment. Most individuals claim that the purchase of their personal home was the best investment they’ve ever made, which is true in most cases because it is the only investment they’ve ever made.

    buy my house quick


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