Homeownership makes sense for countless social and family reasons.
It also makes sense financially, according to Eric Belsky, Managing Director of the Joint Center of Housing Studies at Harvard University who is also on the editorial board of the Journal of Housing Research and Housing Policy Debate, in ‘The Dream Lives On: The Future of Homeownership in America.”
Looking to answer the question whether recent house price declines and the contraction of mortgage credit will produce a profound and lasting change in Americans’ desire or ability to own homes, Belsky finds that “homeownership, because of its unique properties relative to other possible investments (especially for low-income families and individuals), will likely remain an important vehicle for building assets as well as a favored option for nonfinancial reasons as well.”
Here are five factors he found that “make the choice to own or rent financially consequential – and make ownership relatively attractive:”
1. 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 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.”
2. 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.”
3. 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.”
4. 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.”
5. 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.”
Pillars of the Community: More than 300 REALTOR® and Affiliate Members attended the Greater Northwest Indiana Association of REALTORS® (GNIAR) annual Holiday Luncheon last month. This number was up significantly from previous years and another telltale sign that the market is rebounding, according to Director of Communications Nichole DeMario.
During the event, the group collected 880 pounds of food, the equivalent of approximately 735 meals, and raised more than $1,000 with a silent action for the Food Bank of Northwest Indiana.
In addition, during 2013 GNIAR also supported the efforts of Sojourner Truth House by participating in their Walk-a-Thon, Habitat for Humanity of Northwest Indiana with a monetary contribution and volunteer work day and the Crossroads Chamber of Commerce Reality Store. As part of the Housing Industry Team that includes the Home Builders Association of Northwest Indiana and Indiana Mortgage Bankers Association, the group also raised funds for and built a new play yard at Haven House and participated in a project of similar scope for Housing Opportunities.
Individual members were also recognized for their many contributions in the community.
“Dozens of REALTOR® and Affiliate Members were also featured in a slideshow presentation highlighting their volunteer work in the community,” DeMario said. “This is just a small snapshot of what our members do for the communities they live and work in. They are deeply invested in Northwest Indiana and strive to make it a better place.”
Currently, GNIAR is once again taking part in a collection for personal items for Sojourner Truth House. For more information, contact GNIAR COO Pat Pullara at email@example.com.