I have written on this blog a number of times about my housing blues. We have certainly done our share of home repairs over the three years we have been home owners. In fact, I think we have spent at least $15000 in just the past three years on new insulation, appliances, mold remediation, and other small items. That, of course, doesn’t include buying furniture and other things we did to our house.
There are also all kinds of future costs that we will have to deal with from buying a house. Generally, however, buying a home has been a good thing. As Mrs. ROB likes to say “I don’t like paying someone else’s rent.” I am the same way. I like knowing that our home has appreciated in value. I like knowing that my monthly payment isn’t going to go up, as it could with rent. And we have a sweet mortgage refinance. I mean we have a 2.875% interest rate on a 12 year (now 10 year mortgage). Depending on the rate of inflation that is, in essence, having them pay us to live in the house. So buying a house, for us, has been a good thing.
Moreover, generally, home ownership has been one of the primary means for people to build wealth. I am NOT saying you can’t build wealth by renting, but statistically speaking home owners have a higher net worth than renters do. For example, in Orange County, home owner net worth is greater by almost 200,000. One other study has it that generally speaking home ownership creates more than 45 times more net worth than renters.
Now I don’t know if it is 45x worth, but being a home owner can be a good way to build wealth in the United States. And we have a home ownership crisis in the United States. Home ownership forces you to save for a down payment and extra costs. Homes, generally, increase in value (yes I know they can go down). Homes can be a place where you have forced savings.
I think the problem we have in a lot of areas is that home builders aren’t building enough homes and aren’t building them for first-time home buyers who are priced out of the market. That needs to change because home ownership is at 40 year low for the United States.
The Bottom Line: Owning a home comes with a lot of headaches. And sometimes it is NOT cheaper than renting. Generally, however, home ownership has been a primary way to build wealth because of forced savings, increasing home values, and the equity it can bring. Home ownership, generally, is a good thing. We should be coming up with policies to help more people buy homes, particularly in High Cost of Living areas (e.g. like the area I live in).
That does not mean everyone should own a home. There are some places where renting is cheaper. And in that case I hope those people are taking the money they save on renting and investing it to build more wealth. There are a variety of rules of thumb for buying a house and how much house you can afford. Determining if buying a house is right for you is a decision that only you can make, but I think it is a good one for most Americans including for my family.