Considering Your Primary Home as an Investment
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Like many, I’m hoping to buy a home someday instead of renting an apartment. In fact, my fiancee and I almost bought our first home during March of 2007. We were very excited at the time because it was going to be our first house and we even drove over to see other similar houses in the same neighborhood at 3:00am! However, we decided in the end to not put any offers in because we thought the housing downturn would get drastically worst.
Fast forward 9 months, and we are experiencing one of the worst housing slump in US history. Being in California, our decision to hold off on buying a house saved us at least $50,000 and might turn into $100,000-$150,000 when it is all said and done. One side of me is relieved because of the fact that I didn’t buy the house yet, but another side of me really want to live in a nice house that I can call my own. Should I look at the house as an investment? Or should I forget about the ups and downs of my potential house price and be happy that I will leave in a nice home?
Do you consider your primary home as an investment? Take the poll and let me know what I should do!
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Prosper Blog: Prosper, the online marketplace for people-to-people lending » Blog Archive » Prosper Roundup — Reader’s Choice Best Use of Corporate Blog Edition on January 12th, 2008 at 5:25 am Says:
[...] Money Ning wonders if you Consider[er] Your Primary Home as an Investment [...]
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“I deserve it” thinking | On Financial Success on April 29th, 2008 at 10:52 am Says:
[...] current foreclosure mess is just one example of the spread of I deserve it thinking. The American dream was treated as a right and the true costs and sacrifices of homeownership were not counted. Dreams [...]
This article (Renting makes more financial sense) at http://www.smartmoney.com/home/living/index.cfm?story=rent actually makes a good point with regards to housing as an “investment”. The article discusses the changes within the industry and the fact that your appreciation is negated by many different levels.
My wife and I are looking to buy a house as well, but we’re not approaching it as an investment — we’re approaching it as a way to “do what we want with it”. Renting usually prevents you from changing things around, its rare that you can paint the colors you want or even knock out a wall here or there just because you want to
Not until someone will lend money below the rate of inflation at which point the arbitrage will be tremendous … at least for a while
I consider the house I live in an investment, but just not a good one compared to stocks. My view is that aside from taxes I’ll be able to live rent free one day. I also consider my house an investment in an intangible asset - I couldn’t rent the kind of feeling we get from knowing we can stay in this house the rest of our life if we want to and make the improvements to it that fit exactly what we need.
I don’t consider our own house an investment, but that doesn’t mean that it won’t ever be. The first house we owned, we eventually converted into a rental property. Knowing we wanted to do this, it made sense to buy with an investment perspective.
But while I’m the one living in it, I wouldn’t consider it an investment.
I voted yes.
Your primary residence is an investment, but not in the sense of stocks, rental property, etc.
You might not make money, but you will most probably end up spending less than if you rented the same class of property, over a long period of time.
This is because:
1. Unlike your monthly rent, a major part of your monthly mortgage is tax deductible.
2. There will be appreciation over time. Even if it does not make you money above what you spent for the after-tax interest and property tax, it will still mean you spent more than rent.
I mean less than rent
absolutely not an investment. It actually makes me sad when I hear people talk about rising home prices as a good thing. The only way that you can “profit” from rising home prices is if you sell your house and then don’t buy another one. Otherwise, the next house you buy also will be more expensive. Since most people don’t downgrade over time, all that happens is inflation.
Only recently, have housing prices appreciated like they have making them seem like a good investment. People just have short memories.
I don’t think its a good idea to think of your home as an investment, because it is purely speculative at best. Most people buy a home, assume it will go up, sell later and call it an investment.
I share both opinions. The time comes when it`s worth to think about your home as an investment. I agree also with the idea that your cosy home is something that really belongs to you with all the memories. I think that we should find balance between the two alternatives. I also have nearly the same problem because I`ve seen lovely houses for sale in Toronto. Anyway, I won`t refrain from the idea to think of my home as an investment.
Maybe not an investment as such, in terms of making money, but even if it is more expensive to pay a mortgage, maintenance etc, at least at the end of 20-30 years you will have something tangible. If you rent for that same period you have nothing at the end of it, plus you need to keep paying rent, you have to live somewhere.
I’ve written quite extensively on the matter. A home is not a very good investment since it is not diversified amd it is very risky. That being said you do have to live somewhere. It is important to understand these questions at the very basic level. I believe there are hidden psychological and financial aspects to whether or not buy a home. I’ve written on these in my blog. Regards, Dorian
If you unsure as to whether something is an investment or a liability, ask your self this question,
“would it be listed on the asset or liability side my net worth statement and the most defining question is how much income does it produce. Investments produce money liabilities take money, Economics101.
Then of course income producing houses would become an investment. Is it smart to buy your primary home certainly.
if you house is your biggest investment, it just means you don’t have any real investments!
Interesting question. I voted no because when I bought my house I approached the entire process and deal for other reasons. If I were buying it for an investment I would have focused more on the “return” numbers.
Greg
Real estate is certainly a type of investment. But this type of investment generally involves great risk and time. Just becareful.
Yes, it is a perfect investment indeed but you need to manage it well. Not only just a good investment, you can enjoy it. What investment you can buy and use it for enjoyment at the same time?
Everyone: Decisions decisions decisions! I’m sure my fiancee will want me not to treat it as an investment but it’s quite hard to put the commitment to buy something that you know will depreciate significantly in the short term!
Absolutely an investment. It has value and that value may go up and down. It has cash outflows (maintenance, rates etc) and cashflow savings (rent). It may or may not be debt financed (a balance between tying up equity and commiting to debt repayments). All of these things require it to be analysed much like any other investment.
The fact that it may be a good or bad investment does not alter the fact that it is an investment. People can make or lose a lot of money on their investment in the home. (Given what has happened to property prices since we brought I am so glad we did.)
The fact that other investments may perform better does not mean that your home is not an investment. (And it certainly should be included in your net worth calculation:
http://aprivateportfolio.blogspot.com/2007/04/your-home-as-retirement-asset-2.html
The fact that other properties may have gone up or down is, of course, irrelevant to the question.