Vail Daily column: Homeownership makes financial sense
June 28, 2014
My husband and I are just moving to Eagle County because of my job. We have always wanted to live in this area, so we are very excited to start becoming a part of the community. We are, however, concerned about where we should live in this valley. We have decided to try to rent a home for a year before we actually purchase a home. We have owned a home before, but not for several years because we knew we would eventually be moving here. Our financial adviser is pressing for us to buy a home now. As a Realtor, I am sure you are in favor of us buying, too, but do you think the market will be much different in 12 months? What would it hurt to wait?
The answer to your question is not about what the market will be like in 12 months (no one knows that for sure). It is about you renting for another 12 months. I do agree with your financial adviser and would like to give you five good reasons for buying from Eric Belsky, the managing director of the Joint Center of Housing Studies at Harvard. Mr. Belsky, in his 2013 study and subsequent paper "The Dream Lives On: The Future of Homeownership in America," gives the following five financial reasons for owning a home:
These financial reasons don’t include the sense of belonging and the pride of ownership you have when you purchase a home, but they make a pretty convincing argument to look at buying now.
• Housing is the one leveraged investment available to most everyone: "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, home ownership 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 5 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 are paying for housing whether you own or rent where you live: You are either paying down your mortgage or your landlords.
• Owning can be a type 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 can be 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 a home can be 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."
These financial reasons don't include the sense of belonging and the pride of ownership you have when you purchase a home, but they make a pretty convincing argument to look at buying now. I suggest you get a great Realtor that can show you the different communities after listening to your wants and needs. Best of luck to you!
Joan Harned is an owner-broker for Keller Williams Mountain Properties and heads up Team Black Bear, her own real estate team. Harned has been selling real estate in Eagle County for 27 years, is a past chairman of the Vail Board of Realtors, past Realtor of the Year, past director on the Great Outdoors Colorado Board and a member of the Luxury and Land Institutes. Contact Harned with your real estate questions at Joan@TeamBlackBear.com, 970-337-7777 or http://www.SkiAndTeeHomes.com.