5 Reasons Why Owning A Home Is No Longer Worth It
Owning a home is a big part of the proverbial American Dream. Most everyone dreams of owning their own home one day whether it is a beach house, cottage in the woods, penthouse condominium, or a nice, suburban family home. You’ve been conditioned your entire life to strive for ownership. Once you buy you can “make your house a home”. But after the financial crisis in 2009, is home ownership really still worth it? There are still American families living in their homes that are upside down on their mortgage. Essentially, they have to wait until the market finally catches up. So let’s take a look at some counterarguments to striving for the “American Dream”.
It Can Be Trap
Buying your first home or upgrading to a dream home are undeniably momentous and happy occasions in a person’s life. That happiness might not last for the next 10, 20, or 30 plus years though. The best and clearest example is the housing collapse. As of 2015 there were still 4 million Americans that owe 20% more than their homes are worth. That number has vastly improved as the market recovered but the fact remains that it has been over seven years and the recovery has not been complete. For those 4 million individuals, there is no out. They have to stay in their homes unless they can completely pay it off or afford to take a loss.
When you buy a home, you usually do so with the intention of staying there for a duration of time. Selling a home isn’t always a quick and easy process. Depending on the market, you might not be able to sell for months. This can be an extremely stressful situation if you have a job transfer. Paying for mortgage on an empty house while simultaneously paying rent in a new area can be financially draining. Owning a home does really force you to put down roots in that area. Picking up and moving as a homeowner is much more difficult that picking up and moving as a renter.
It Can Be a Money Pit
A lot of people only really figure mortgage, mortgage insurance, property taxes, and utilities into their monthly and yearly budgets when it comes to their home. However, many either disregard or are unaware of the plethora of things that can go wrong with your home. And they will conveniently occur at the worst possible times. If your water heater breaks down, you are now on the hook for a few thousand dollars. Your alternative is to do without hot water. That will go over very well with the family.
That is just one example too. Your roof, gutters, appliances, and more are all at risk for needing replacement.
It is More Expensive Than Renting
Buying a home is typically more costly than renting. Your mortgage might be less than the rent but when you factor in PMI (if you have it), taxes, and utilities, you likely are pushing yourself over the rental threshold. This doesn’t even include the upkeep costs such as routine servicing of your HVAC system, fireplace, or other essential home systems. Your home is likely larger than the apartment you would rent meaning you have more space to fill up with furniture and decoration.
Many people feel that renting is “throwing away money” because it is not going towards anything. What those people don’t realize is that a huge chunk of the payments made to your house actually go towards taxes and interest. Only a small portion actually goes towards your mortgage each month.
Your Investment Isn’t Liquidable
Along the same lines as the previous point, home ownership is seen as an investment. This is completely true. Owning a home is a long-term investment that is likely going to provide a sizeable return at some point in time.
There is one downside to this investment though and that is you don’t really see tangible, liquidable value from it. Just because your house value is going up on Zillow, doesn’t mean that money is yours. Someone has to actually purchase it from you. Even then, a huge percentage of that purchase goes towards the realtors’ commissions and transaction fees. That can eat away at your profit margin.
There Are Better Ways to Invest
In the long run, there are better ways to invest your money if that is your sole purpose of buying a house. The down payment you make towards a home is usually a substantial portion of money. This can go to any number of investments.
For example, you can use the down payment to start a business. Times will be tough for a little while but the people who get ahead in life are usually business owners, not employees. You can also try your hand at the stock market. You don’t have to be a genius, you just have to look for high quality companies that will be around forever.
If you want to stay within the realm of property, you can invest in land. Land is a great investment because it typically appreciates in value, has low taxes, and is in scarce supply. The cost of owning land is relatively cheap and if you purchase in an area about to be developed, you could be in line for a handsome return. Alternatively, if you really want to buy a house, you can turn it into an investment property. Renting out your home can often earn you a great passive income.