This is purely thrown out there for discussion. I take no position as to whether or not to buy a house as an investment. I did some bottom fishing myself in SoFla after the bubble burst.
There is a lively debate as to whether buying a house is a good investment. According to the latest Fannie Mae National Housing Survey when asked what investment amounted to a " safe investment with a lot of potential " the most popular answer was "buying a home ". Leaving aside the recent bust in housing prices how does buying a home stack up as an investment over the long term ? Robert Shiller , winner of the 2013 Nobel Prize in Economics and frequent guest on Kudlow says that historically housing has only increased 0.3 % in value; annually adjusting for inflation over the last 100 years. In contrast the S & P 500 has gone up 6.5% on an annual basis. Please take note that Shiller's data is based on nationwide housing. Collapses in Vegas , parts of California , the Rust Belt and Upstate N.Y. have to be factored in with hot spots like SoFla , the D.C. metro area, parts of the Carolinas etc. Proving the old adage that the "three most important things in real estate are location , Location and LOCATION ".
Other factors to consider are that housing deteriorates over time ; property taxes plus water and sewer charges have to be paid; it costs money to maintain a property ; some houses go out of style and a whole bunch of other stuff that affect long term value. A good look at local flood patterns would be a GREAT idea!
When comparing what a house cost when it was new to its current value , Shiller says to be careful. A LOT of the increase in a LOT of areas is nothing more than a lot of inflation.
I am staying as far from anything "political " as possible so I will avoid any discussion of the deduction for home mortgage interest and the current state of Fannie Mae and Freddie Mac. ( You can do a search for current Senate legislation winding down BOTH .)
The bottom line is that BEFORE buying it would be a good idea to decide WHY you want to buy vs. rent ? To live in ? To rent out ? As an investment ?



Reply With Quote




Bookmarks