7 Reasons to Own Your Own Home
1. Tax breaks. The U.S. Tax Code lets you deduct the interest you pay on your mortgage, property taxes you pay, and some of the costs involved in buying your home.
2. Gains. Between 1998 and 2002, national home prices increased at an average of 5.4 percent annually. And while there’s no guarantee of appreciation, a 2001 study by the NATIONAL ASSOCIATION OF REALTORS found that a typical homeowner has approximately $50,000 of unrealized gain in a home.
3. Equity. Money paid for rent is money that you’ll never see again, but mortgage payments let you build equity ownership interest in your home.
4. Savings. Building equity in your home is a ready-made savings plan. And when you sell, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.
5. Predictability. Unlike rent, your mortgage payments don’t go up over the years so your housing costs may actually decline as you own the home longer. However, keep in mind that property taxes and insurance costs will rise.
6. Freedom. The home is yours. You can decorate any way you want and be able to benefit from your investment for as long as you own the home.
7. Stability. Remaining in one neighborhood for several years gives you a chance to participate in community activities, lets you and your family establish lasting friendships, and offers your children the benefit of educational continuity.
To calculate whether renting or buying is the best financial option for you, use this calculator courtesy of Ginnie Mae:
http://www.ginniemae.gov/rent_vs_buy/rent_vs_buy_calc.asp?Section=YPTH
Talking Points: Homeownership Benefits
Homeownership offers immediate benefits and long-term value. Homeowners accumulate wealth for the future while enjoying the benefits of a shelter that they can use, improve and sell. Their home is a safe haven for investment.
Buying a home should be approached as a good long-term investment, providing both equity accumulation and tax benefits over time.
Homeownership is how many American families begin to accumulate wealth. According to data from the Federal Reserve Board, a homeowner’s net worth is 46 times that of a renter’s.
Homeownership provides shelter and security to families, and fosters involvement in community life as well as participation in democratic institutions. Homeownership also provides important social and economic benefits. It is the cornerstone of a healthy community and the basis for positive community involvement.
Homeowners are motivated to stay abreast of local issues to protect their investment. Research reported in the NAR study, Social Benefits of Homeownership and Stable Housing, shows that homeowners are more likely to vote and that they volunteer time for political and charitable causes more frequently than renters.
According to data from the U.S. Census Bureau, owners do not move as frequently as renters, providing more neighborhood stability. In turn, involvement in community quality-of-life issues helps prevent crime, improve childhood education and support neighborhood upkeep.
Despite recent slowdowns in some markets, housing remains a good long-term investment, and demographic demand favors housing over the long term.
Local housing markets may experience temporary price declines as well as rapid price increases in the short term, but over a typical six-year period of homeownership, home values usually rise at a normal, gradual pace. Exceptions to this general trend almost always result from prolonged localized economic downturns, often driven by job and population losses.
The children of the baby boomer generation, often called echo boomers, are the second largest generation in U.S. history, comprising about 75 million people born from 1982 to 1995. The oldest of these echo boomers are now entering the years in which people typically buy a first home, while the country’s 78 million baby boomers remain in peak earning years.
Immigration continues to rise. According to the Joint Center for Housing Studies at Harvard University, net U.S. immigration has averaged about 1.2 million annually since 2000, and the foreign-born represented more than 40 percent of net household formations in the first half of this decade, up from less than 30 percent in the 1990s and about 15 percent in the 1980s.
Minorities’ share of household growth has also been expanding. The Joint Center for Housing Studies at Harvard University estimates that minorities will comprise 68 percent of the projected household growth between 2005 and 2015.
Dollar for dollar, the rate of return on an individual’s cash downpayment on a house is substantial. Buyers typically use their own money to cover only a small portion of the purchase price, but the home appreciation they realize is based on the total value of the property.
Homeowners benefit from the power of leverage. Over 10 years, a $10,000 investment in the stock market at a normal 10 percent market rate of return would yield $23,600. The same investment as a down payment on a $200,000 home at a normal appreciation rate of 5 percent would return nearly 5 times the stock market return, at $110,300.
Housing is not a quick-in, quick-out investment. When purchased for the long term, housing is one of the safest investments consumers can make. In addition to the savings accumulated through a buildup of equity and tax advantages, a home provides shelter. No paper investment provides this benefit.
According to the 2007 NAR Profile of Home Buyers and Sellers, first-time home buyers made a median downpayment of 2 percent, while repeat buyers who financed their purchase put 16 percent down, indicating the wealth-building effect of homeownership.
In areas across the country, conditions are favorable for home buyers, allowing many to achieve the American dream of homeownership.
Over the past two years, housing affordability has improved, with incomes rising, home prices falling, and conforming mortgage rates at near historic lows.
Statistics from the U.S. Census Bureau suggest that homeownership is affordable for many. In the fourth quarter of 2007, the national homeownership rate was 67.8 percent – more than two in every three households in America own their own home.
Consumers who are considering buying a home should contact a Realtor® in their local market, who can help them begin to build their future through homeownership.
Updated May 9, 2008, Copyright National Association of REALTORS®, Reprinted from REALTOR.org with permission.
Reprinted from REALTOR® Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS® Copyright 2005. All rights reserved.www.REALTOR.org/realtormag
