After reading Ken Fisher’s op-ed in USA Today, it should be crystal clear to you that homeownership is a lifestyle choice, not an investment. And he doesn’t even mention the implications of the recent changes in the deductibility of state and local taxes or that property taxes levied based on the present market value of your home are taxing income you haven’t even realized yet. Unless home prices are skyrocketing while the taxes remain fixed, real estate taxes will eat up any conceivable returns. That might be true in California but it certainly isn’t true in Chicago. Home prices here haven’t gone up in 15 years while property taxes have more than doubled over that period.
Not exactly.
Rarely mentioned with homeownership is home maintenance – paint, roof, gutters, siding, sidewalk, driveway, patio, etc., and this is usually not cheap. This does not include accidents or other problems such as under-slab pipes that break.
It is also rarely mentioned that when the mortgage is paid-off, you own something, and then, you live rent-free.
As to the 401(k) or other investing, it is nonsense. Few people are going to rent cheaply and invest the savings.
On the contrary, owning your own home affords you the opportunity to dramatically increase your wealth by doing improvements yourself. And you won’t have to pay income tax (though ultimately capital-gains tax) or the excessive payroll taxes.
I have personally gained hundreds of thousands of dollars doing kitchen and bath remodels on my own home, and I didn’t have to commute to work. I even greatly improved a house I once rented, only to have the landlady sell it to me for a bargain price. But of course you can’t count on that.
There may be isolated markets where RE can be considered an investment. But hear is a hint: investments in illiquid assets is a bitch. A real bitch. RE is trading; but doing that without liquidity is the ultimate speculative trading. At least what I do is owning an illiquid but controllable cash flowing enterprise.
But for the most part home ownership is consumption. And by the way, even if you rent all the expenses cited are impounded in the rent rate. So we come full circle: it’s avlifestyle issue. At least if you rent you have a put option once a year.