When my husband and I were looking for homes seven years ago, the real estate agent told us over and over again that we were making an “investment.” Even at the time, I was skeptical of these claims. I couldn’t see how, when we’d be paying $500 more per month (over rent), plus taxes, maintenance, and repairs, we would come out ahead — even with tax deductions. I didn’t think appreciation would help that much.
But you don’t buy a home just for the investment value. There are a lot of other non-financial factors that go into the decision, from security to the charm of having a place you can call your own.
Of course, now that I know I might have to pay as much as $10,000 to sell our house, I really don’t think of it as an investment. We bought near the peak of the market, which was probably sensible considering that it would’ve been practically impossible to get a bank to take my freelance income (our primary source of income) seriously in the two years following the financial crisis.
At any rate, here we are: with a house that is worth less than we paid for it.
We’ll be lucky to get what we owe on the mortgage, and then we’ll still have to pay all the closing costs and commissions that come with selling. We could sell it ourselves, but then we’d still have to pay closing costs and probably wouldn’t get as much for it — which means we’d still be out close to $10,000. And For Sale By Owner is a lot more work than having a real estate agent take care of most of it.
Why Buying a House Is a Gamble
I recently read an article on CNN Money saying that the current housing market is a crapshoot. You just don’t know what you’re going to get.
We’re beyond the point where you could buy a house, sell it two or three years later, and break even or enjoy a profit. If you really want to get more out of your home, you have to be in it for the long haul. We’re talking at least 10 years, but probably it’s better if you can stick with it for 15 or 20.
According to the article, which quotes Karl Case (of Case-Shiller fame), “If you’re not buying it for the long haul, don’t buy because there’s a good chance you’ll have to sit through some down cycles.”
If you’re not going to be staying in the home through tough times — and you can’t ever truly predict when those will be — chances are that you’re not going to come out ahead. By the time you account for the interest, taxes, repairs, maintenance, utilities (especially if your home is bigger than your rental), and other costs, it’s hard to even break even.
Before you take the plunge and purchase a home, seriously consider what you’ll get out of your primary residence. If you know from the get-go that you can’t count on your house as a financial investment, you’ll be less disappointed when you try to sell it later.
Do you think buying a house is a gamble? If you own one already, are you happy with your decision?