I'm a proud homeowner. Like a faithful mate, I stood by my home during the good times and the bad. I could have given up on my dream of homeownership when housing prices bottomed a few years ago. Even though my husband and I were underwater on our mortgage for several years, we stayed put. I recently read an article by CNBC that new homeowners this past summer were duped into thinking they were getting in just before the next great housing boom. According to the author, recent housing data shows pending-home-sale activity is down 1.2 percent compared to last year. It was down 5.6 percent in September, continuing a downward trend. I can relate to homebuyers who bought this past summer before values started to go down. However, I don't think anyone is a sucker for buying a home at this time. And, I'm encouraging my 20-year-old son to buy a home now.
Taking advantage of low rates
Even though mortgage rates have risen in the past year, they are still low from a historical perspective. I bought my first home when mortgage rates were at about 7 percent. At that time, everyone was praising how low the rates were. In the 1980s, mortgage rates hit the double digits. As long as my son can get a single digit interest rate, he will come out ahead.
Making a plan to stay put
My son has a career that won't involve a lot of relocating in the next 5 to 10 years. If he planned to move frequently, I wouldn't recommend he buy a home. In some cases, a job transfer doesn't have to be a downside to home ownership. One of my friends bought a foreclosure in Arizona. She moved across the country, renting out her Arizona home, becoming an "accidental landlord." Since she brings in more money in rent than she pays on her mortgage, her home has become an asset.
Owning for less than renting
Although experts such as Robert Shiller point out there are downsides to home ownership such as depreciation and maintenance costs, people ignore the fact that it's also expensive to rent. I rented at least 10 different apartments, duplexes and houses in my 20s and early 30s. I moved at least once a year. If I had owned a home, I would have been more motivated to stay put. Instead, I incurred the high costs of moving, redecorating and new appliances and furniture. Moreover, the cost of rent is actually higher than a mortgage payment at this time.
Giving the investment time
I think the reason some people think homes are not a good investment is because they take a short-term approach just as they do with the stock market. My home became an investment as soon as I went from having negative to positive equity. At one point, we owed about $20,000 more on our home than it was worth. Now that the values of homes in our area have shot up, the situation has changed dramatically. We owe $94,000 on a home that could sell for $194,000. If we had rented this entire time, we would walk away with nothing in our pockets.
Although my son is too young to be thinking about retirement, owning a home in his 20s will help him build up equity. When he is in his 30s and starting a family, he can use the money from his first home to fund a step-up home purchase. My husband and I purchased our family home in our mid-30s. When we retire mortgage free, we won't feel like suckers. But the key is to be free of that mortgage. If we still had a mortgage by age 65, we really would be suckers.
More from this contributor:We Downsized Our Mortgage but Not Our House
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