We have reported many times that the American Dream of homeownership is alive and well. The personal reasons to own differ for each buyer, with many basic similarities. Eric Belsky, the Managing Director of the Joint Center of Housing Studies at Harvard University expanded on the top 5 financial benefits of homeownership his paper – The Dream Lives On: the Future of Homeownership in America. Here are the five reasons, each followed by an excerpt from the study:
Housing is typically the one leveraged investment available.
Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to 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 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.
You’re paying for housing whether you own or rent
Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.
Owning is usually a form of “forced savings
Since many people have trouble saving and 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 can deduct mortgage interest and property taxes from their income. Additionally, if they sell their homes for a gain, single filers can exclude up to $250,000 of capital gains from their income, while married couples can exclude up to $500,000.
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.
We realize that homeownership makes sense for many Americans for an assortment of social and family reasons. It also makes sense financially. If you are considering a purchase this year, contact a local professional who can help evaluate your ability to do so.
If you have any questions about five financial reasons to buy, you can contact us at +1(516) 829-2205 and +1(516) 647-4289. Additionally, you can also find us on various social media platforms such as Google My Business Profile, Facebook, Twitter, Linkedin, Instagram, YouTube, and Pinterest.