Is Home Ownership Still Worth It?
Homeownership has long been deemed an American dream. However, with today’s rising house prices and increasing foreclosure rate, homeownership may not be in the investment list of many younger Americans.
A research conducted by real estate listing and analytics company, Zillow, revealed that many Americans today are not so keen with regards to homeownership, and for many good reasons. Among which is the long break-even period. According to Zillow, it will take homebuyers at least three years to break even on their property investment, particularly in some of the country’s largest housing markets such as Florida, North California, Virginia and Philadelphia. The longer breakeven period entails that homebuyers would have to wait three years or more before the cost of owning will be equal to the cost of renting.
Another reason Zillow cited is the high cost of down payment and number of years individuals want to stay in their job. “Young workers face a lot of hurdles on the way to homeownership, including saving for a down payment in the first place and deciding where and when to settle down,” said Zillow’s chief economist, Svenja Gudell.
Today’s workers are increasingly mobile, which is why many consider renting a more practical choice over owning. Not mention, many millennial tend to settle down and have children later in life, pushing back plans of homeownership at the bottom of their priority list as a result.
Meanwhile, there is an increasing cry among young workers that a home is not just the best investment today – especially with the rising interest rates and the sluggish growth of home prices.
In his blog “Marginal Revolution”, George Mason University economist Alex Tabarrok blatantly denounced homeownership. He wrote that housing is an overrated financial investment for the reason that it is unwise you to lock a significant amount of your wealth into a single asset, and that houses don’t pay dividend. Tabarrok encouraged investors to diversity their investment with stocks instead.