Is buying a home really the solid gold investment people say it is, or just an illusion we take as true?
If you ask an economist they would tell you that buying a home that someone else built is not an investment. In fact you could argue that the person that built the home was the investor, as he added housing stock to the economy and paid for some of the infrastructure.
How an economist views buying a home for investment
In the economic world, an investment requires sacrifices of consumption today to improve the capacity of the economy in the future. Plant and equipment, commercial buildings, new ports and rail infrastructure are examples.
The problem for an economist is that homes changing ownership does not bolster the nation’s economic capacity. Though it may help the Real Estate Agents and industry make profits running their service businesses.
The way a home seems an investment is that due to the ability to leverage the purchase of a home with a home loan, so that any price growth due to demand or inflation is seen as a capital gain that seems to make it worthwhile.
Is buying a home a gamble or a hedge against inflation?
Economists would argue that buying a home is a gamble, with the homeowner having no control over the outcome of the performance of his or her investment. The birthrate, immigration rates, inflation and availability of new developed land all effect the value of established homes.
How medical breakthroughs have increased home values
I would argue that medical breakthroughs have played a bigger part in property values than most people give it credit. Why? Because people are living longer and staying in their homes longer due to better health and longevity mainly due to medical care and health advise.
Will history no repeat itself and the glory days of home value increases return
Homeowners made a lot of money owning homes from the 1970′s till recently. But the recent past, and the projected future tell a different story. Home values have fallen and may fall more.
I do believe that there will be raises in the future if only moderate, and this will depend on future migration and interest rates.
Buying a home is best done for family security reasons
The fact is the buying a home is an investment, but not necessarily a financial one. Its investment in stability, family and a sense of security that many people renting never experience.
On the basis that you have to live some where, if you have a stable job, a stable relationship and are settled in your community it makes sense to own your home and “put down roots”. In other words ownership has a value worth “investing in”, even where no capital gains are likely.
By the same token if you are taking a short term view on any of the above, [less than 5 years], then renting may be your better option.