While many cite home ownership as a good financial move, it turns out that financial considerations aren’t the prime motivators that cause first time buyers to take the plunge into home ownership.
Each year the Joint Center for Housing Studies at Harvard University surveys participants to ask the question: “What are the most important reasons to buy a home?”
This year the answers clearly showed that finances weren’t the primary reasons. Instead, the top four reasons that survey respondents stated were:
- Having a good place to raise children. Young homebuyers are looking to their children’s future by choosing homes in safe neighborhoods with well-regarded schools. They want the stability of knowing that they won’t suddenly need to move to a neighborhood that isn’t so desirable for their children.
- A feeling of comfort, security, and safety. A home provides a physical structure in which families can lock out the world and feel safe in their own space. Unlike a rental home where the landlord can demand entrance, it’s their own property and no one else can enter without permission. Security issues concern all people, so in case you are looking for a modern security solution, learn more about counter-drone technology at https://sixtechsys.com/counter-drone.
- They want more space. Whether they have a young growing family or want room for an older relative to move in with them, they’re looking for space that fits their needs.
- Control. A desire to do what they please and control what goes on in their own homes is another prime motivator. It may be a desire to try new decorating techniques, hang a basketball hoop, plant a garden, or bring a puppy into the family – but they want the freedom to make those decisions themselves.
Financial considerations didn’t come into play until the 5th reason: A desire to build equity in something they can pass on to their children.
Home ownership does build wealth.
As many learned during the boom and bust times, homeownership is not usually a good vehicle for short term investment, but those who purchase a home for the long haul do build wealth.
The housing market has ups and downs, but over time the value of a home that is well maintained will increase. Those who purchased homes 30 years ago and paid them off in full are now experiencing windfall profits – or passing valuable assets to their children.
When you consider that rental payments must necessarily exceed mortgage payments in order for landlords to find them worthwhile, it’s also easy to see that home ownership saves money in the short term. In addition, as years go by, the difference between a fixed mortgage payment and an ever-increasing rental payment on a comparable home keeps widening.
While a percentage of every dollar spent on a mortgage payment adds to the homeowner’s equity, every dollar spent on rent goes straight to the landlord and his or her equity building program.
This could be one reason why a study done by the Federal Reserve found that the average net worth of a homeowner is thirty-six times greater than the average net worth of a renter.
Is home ownership a smart move?
Yes – as long as you plan to stay in the community for the foreseeable future. If you know you’ll be moving on in a year or two, the answer is no.
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