Thinking of buying a house? While today’s mortgage rates may seem a little scary, there are two good reasons why moving into your own home can still be a smart choice if you’re ready and able.
1. Home values usually increase over time.
Last year, there was confusion about the direction of house prices. Don’t be mistaken. It is still growing nationally. Over the long term, home prices almost always rise (see chart below).
Overall home prices have risen steadily over the past 60 years, according to data from the Federal Reserve. An exception occurred during the housing crisis of 2008, when prices did not follow normal patterns, but overall home prices continued to rise.
This is the main reason why buying a house is better than renting. As prices rise and mortgages are paid off, equity builds. Over time, these growing assets can actually increase your net worth. The Urban Institute says:
“Homeownership is critical for wealth building and financial stability.”
2. In the long run, rents will continue to rise.
Another reason you might want to consider buying a home instead of renting: Rents have been rising for years. Of course, in some areas it may be cheaper to rent now, but every time you extend your lease or sign a new one, you may experience a rent increase. According to iProperty Management, rental prices have also risen steadily over the past 60 years (see graph below):
So how can we escape the vicious circle of rising rents? Buying a home with a fixed rate mortgage stabilizes the value of your home and protects you from rent increases. This stability is a big problem.
A down payment is like an investment and you have to make a decision. Do you want to invest in yourself or keep paying your landlord?
When you own a home, you are investing in your future. The rent is cheap, but the money paid monthly remains forever.
Jessica is the same as Dr. Jessica, chief economist, deputy chief and deputy chief economist (Nary):
“If a homebuyer is financially stable, able to manage monthly mortgage costs and can handle the associated household maintenance expenses, then it makes sense to purchase a home.”