Despite a housing market collapse which resulted in a foreclosure crisis and falling homeownership rates, most Americans across demographic categories still want to own homes!
This was a central theme of research completed by Eric Belsky, the Managing Director for the Joint Center of Housing Studies at Harvard University. In January 2013, he released a paper entitled, “The Dream Lives On: the Future of Homeownership in America.”
Belsky’s paper questioned whether recent house price declines and the contraction of mortgage credit would produce profound and lasting change in Americans’ desire or ability to own a home. He wrote that rates of homeownership are influenced by market conditions, such as home prices, high unemployment, and tightening of mortgage credit, as well as age, race, and household type. Yet despite the recent housing crisis, research shows that Americans still have a deep-seated desire to own a home
In his paper Eric Belsky reveals five financial reasons people should consider buying a home:
- Housing is typically the one leveraged investment available.
“Few households are interested in borrowing money to buy investments such as stocks or bonds. And few lenders will lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty twenty percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a five percent return on their equity. With many buyers putting ten percent or less down, their leverage factor is ten or more.”
- You’re paying for housing whether you own or rent.
“Homeowners pay debt service to pay down their own principal while renters pay down the principal of a landlord.”
- Owning is usually a form of “forced savings”.
“Since many people have trouble saving, yet have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”
- There are substantial tax benefits to owning.
“Homeowners are able to deduct mortgage interest and property taxes from income…On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”
- Owning is a hedge against inflation.
“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”
Americans instinctively desire to own their own homes. They associate homeownership with greater control over their lives, less insecurity over their place of residence, and better communities. And for most would-be homeowners, in addition to the emotional and quality of life benefits, it’s clear that homeownership provides a huge financial and tax benefit that pays off today and well into their future.
Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist®, and a published author. His interviews include Blog-Talk Radio, Newsday, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.