I get calls and emails all the time from potential buyers fretting over whether they should buy a home or not. The short answer is, depends. The long answer. . .well, here it is.
The First Fundimental
The reality is, it is almost always okay to buy a home. The only exceptions to this fundimental are whether you can actually afford it, and whether the home sits in a flood plane, on a geographical fault-line, in a war-zone, on a hurricane frequented beach, in tornado alley, etc., etc. I sometimes question why someone would build a home that is frequented by the wrath of God. But enough about religion. . .
The First Fundimental Broadened
That first part of the first fundimental is so important, I feel the need to spend a little time on it. It is NEVER okay to buy anything you can’t afford. Our consumption-driven country and economic philosophy many times get us into the predicament of spending money we really don’t have. Delayed gratification is not something we, as a nation, specialize in. People want what they want, and they want it now. This type of thinking is partially responsible for the mess we’re in now.
What Is A Home?
Here is fundimental principle #2, and we all need to keep this in mind: a home is a place to live and raise a family. It is secondarily an investment. A home is truly an investment only for a few wild speculators, and a very few seasoned professional property-holders. For the majority of Americans, a home is a place where you kick off your shoes at the end of the day, get comfortable, watch TV (not too much!), play with the kids, congratulate the wife as she decorates, etc. In almost every case, and there are always exceptions, if you live in the home until you NEED to move, you will inevitably come out ahead. That is, the home will be worth more than you paid for it. This is a SECONDARY benefit to homeownership. Only a few Americans make this their primary purpose.
The Poisoning Of The Well
The problem seems to be that we as ordinary homeowners have been “infected” with the speculator’s disease. Because of market volitility and rapidly increasing prices, we were conditioned to the belief that our homes were going to appreciate rapidly, and we acted on that assumption. We sold our homes for way more than they should have been worth, we pulled out stacks and stacks of cash from the “ATM” that became our homes, and we speculated that we could buy bigger and ever larger homes, and make money (lots of it) in the meanwhile. I encourage you to look up the dangers of “buying on margin,” as this is directly related.
If You Insist
If you simply must view a home as investment, think of it as a longer term investment. That is exactly what it is. Think of it this way: the average homeowner will live in a home for 5-7 years. If we look at the rate of growth over the long term, the gains are almost always appreciable. Since the 1940s (and before), home prices have gone up.
If You Plan to Stay. . .
So, if you want to buy a home, live in it, and raise your family, now is a great time to buy a home. Since prices in metro-Phonix have lowered some, housing has become more affordable. This is great news for many buyers who were pushed out of the market when prices were sky-rocketing. There are so many great houses on the market at unbelievable prices, it’s a buyer’s heaven.