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Americans still believe home = investment

Posted Aug 19 2009, 01:40 PM by Karen Datko
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If there's anything the housing bubble should have taught us, it's that a home is a nice place to hang your hat. Investment? Not so much.

Still, 92% of Americans consider a home a good investment for the future, a new Bankrate survey says. That's incredibly optimistic in light of the fact that 48% of those surveyed worry about whether they can afford their homes, now or down the road.  

The survey does show we're a practical bunch when it comes to love and money. Six out of 10 would reconsider their marriage plans if they found out their sweetie had lots of debt. (After the knot is tied, limited finances would not stop a similar number from divorcing a lousy spouse.)

Among the many head-scratchers in the survey results:

  • The national savings rate is up, but that doesn't mean everyone is socking away more money. Far from it. Only 17% of people said they're saving more than they were before the economy went south, and 36% are saving less.
  • Only 35% have a six-month emergency fund on hand in case of job loss. Another 27% said they'd be pretty much up the creek and could end up losing their homes.
  • Are we preparing for a decent retirement? No. Seven out of 10 worry that they're not saving enough.

A Bankrate story about the survey observes that a quarter of U.S. homeowners owe more on their house than it's worth, and the number is expected to nearly double. So why are people so positive about homeownership as an investment?

"Most people are not selling their homes, so they don't see the possible illiquidity that is in the market or any of the negatives that are on that side," Jeffrey D'Italia of Firstrust Financial Resources told Bankrate.

Maybe it's the way people define investment. Sure, the stock market is more productive over time (and 49% of those surveyed apparently recognize that) but for many, having a roof over your head that's bought and paid for is the height of security. 

Related reading:

3 bad reasons to buy a home

Today's top 5 homebuying blunders

Retirement? Fuhgeddaboudit

An emergency fund out of thin air

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Comments

 

Homes did not become an investment until the early 1970's  at that point you could  expect to sell the property at a higher price than paid and move up to a more expensive  home.  That carried forward with a few up and downs until the early 1990's.   It may always be an investment but that does not mean you will sell at some point  in time at a higher  price.    The purpose of a home is to provide  shelter not an investment  item.

William J. Lyon (Posted 08.19.09 2:40 PM ) Report Abuse

Shouldn't land be considered an investment since it is one of the few finite resources in the world to where there is no substitute?  Therefore, it should raise in value as population increases.

t4bb (Posted 08.19.09 3:02 PM ) Report Abuse

Homes stopped being an investment when people had to take a 30 year mortgage out.  The interest on a 250k house at 6% interest over 30 years is 289K for a total purchase price of 539k - this does NOT include improvements, Property Taxes or insurance.

So, if 30 years from now you think you can sell your 250k house for more than you paid for it, think again.  I'm perfectly happy paying 1k in rent each month because if my fridge breaks, I just call someone and it's replaced within 24 hours.  I'll never own it, but that also means I'll never be tied to it and can move as freely as my family allows it.

leah (Posted 08.19.09 3:10 PM ) Report Abuse

Read this and be smart:  A home is a long term investment, if you buy it before it (because of the neighborhood it is in, shoots up in value.  My parents were ofered their house (renters) in Anaheim CA, for 15K.  Today it would be worth 750K.  

People in parts of Brooklyn bought apartments 20 years ago for 20K or 30K.  Now, even in bad shape, they bring in 230-290K minimum.  That is an investment.  

Buying a nice home in a good neighborhood with good schools, is NOT investing.  Because there is no chance that neighborhood will skyrocket, unless  they discover the fountain of youth in your backyard.

enginee (Posted 08.19.09 3:44 PM ) Report Abuse

I love renting.  And as the poster stated above, no worries about repairs to the house or appliances, or paying tax and insurance.  And again as stated above, if I decide to move, with a 30 day notice, I'm outta here!  Does owning a house mean your standard of living is any better than mine?  No, becaue whether owned or rented, they both provide shelter.

It's like someone driving a big $50,000.00 SUV, and me driving a 2001 Nissan Sentra.  Better standard of living?  Nope!  They both get us where we want to go.    

pc (Posted 08.19.09 3:47 PM ) Report Abuse

Yes, pc, but think on this.  When you are 65 years old, and want to retire, compare your situation, where social security does not cover 1/2 of what rents are, to the guy who bought a place in his mid thirties, and at 65, has no rent to pay because be paid off his mortgage.  Then tell me how glad you are that you were free to move to another shanty town where you could get your fridge fixed for 50 bucks less than a homeowner.

enginee (Posted 08.19.09 3:53 PM ) Report Abuse

leah, good for you, but over a 30 year period,  considering rent hikes, you will have paid over $400,000 for a space not even worth half that on the open market. You are still paying a high price for that freedom.  

Also the 30 year mortgage was developed as part of the new deal, since before that the only way to buy house was to put at least 50% down and paid off within 5 years.  Not everyone that purchased homes are looking to make a profit, my aunt and uncle still live in the home my grandparents helped them buy when they married over 40 years ago.  My grandmother has lived in her home for almost 60 years, most of my neighbors on my block have been in their homes for over 20 years.

trader joe (Posted 08.19.09 4:00 PM ) Report Abuse

enginee...you make a good argument except for the "shanty" town part :)  but I wonder how you assume I'll have no means other than social security at that age?

pc (Posted 08.19.09 4:06 PM ) Report Abuse

Enginee, the "guy who bought a place in his mid thirties, and at 65, has no rent to pay because he paid off his mortgage" still has to pay property taxes and maintenance. Don't get me wrong; I can't wait to own my own home one fine day, but I'm just pointing out that paying off that mortgage doesn't free him from living expenses entirely. How cool would it be if it did, though??

M. (Posted 08.19.09 4:46 PM ) Report Abuse

You can rent at a 1000 a month for 56 years if you figure in 3000 a year in property taxes... If you start at 30 years old, you'll be losing money compared to buying a house at 86... If you bought Long Time care insurance your rent will be paid for in a care facility at that age.. No upside down, no foreclosure... Either way seems to work, do what you like to do...

Dawg (Posted 08.20.09 6:48 AM ) Report Abuse

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