5 Financial Reasons to Buy, According to Harvard

    After a very nice dinner and a few cocktails there raged a debate between real estate professionals about the housing market and its future. More so than that there were questions about just how many financial reasons one could come up with to own a house. In very few markets these days it is more advantageous to be a renter than a buyer (much the same it was in 2006 and 2007) which means that it is more fiscally responsible to be a home buyer than to be a renter. The thing that was explored over an amicable time with colleagues was the ability to come up with 5 financial reasons to buy a home.  Eric Belsky is Managing Director of the Joint Center of Housing Studies at Harvard University. He also happens to currently serve on the editorial board of the Journal of Housing Research and Housing Policy Debate. Last year Mr. Belsky released a paper on homeownership where he reveals 5 financial reasons for people to consider buying a home. Here are his 5 reasons with an excerpt from his paper: 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 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.”

    We have harped on the financial potential of owning a home and the freedom it gives you. It is good to see economics experts agree with such assertions as it validates what we’ve been telling you all along – owning a home is a great idea. We realize that homeownership makes sense for many Americans for an assortment of social and family reasons, but now, as you can plainly see, it also makes sense financially.

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