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Philosophy, Religion & Society / Buying a home is a terrible investment
« on: September 10, 2016, 09:01:56 PM »
It is a common myth perpetuated in our society that buying a home is a good investment. Home ownership is seen as one of the best things you could do in your life. You purchase your home and at some time in the future it will greatly increase in value.
Lets say we bought a home in 1980. The average price of a home in the United States in 1980 was $68,714.00. If we hold onto it for 30 years on a mortgage and sell in 2010, the average price of a home in the United States is now $272,900. Huge profit!
It is 2010 and you sell your house. You now theoretically have $272,900 in the bank. But wait, you still need somewhere to live. You probably want to live in at least the same quality of house as the one you were living before, right? Who would want to downgrade their living experience? But those houses are now all averaging at $272,900, too. It seems that in the end you didn't really make anything in your investment.
The only advantage you would seemingly get is to put the new home on another 30 year mortgage from the bank, to be paid off in monthly payments, and enjoy your money in the present. But now you are merely living on borrowed money, not your own. Eventually you will need to have to pay off your new home with your money, old or new, or the bank will take it back and claim what is theirs, all profits from your home investment strategy eventually equaling zero.
Lets say we bought a home in 1980. The average price of a home in the United States in 1980 was $68,714.00. If we hold onto it for 30 years on a mortgage and sell in 2010, the average price of a home in the United States is now $272,900. Huge profit!
It is 2010 and you sell your house. You now theoretically have $272,900 in the bank. But wait, you still need somewhere to live. You probably want to live in at least the same quality of house as the one you were living before, right? Who would want to downgrade their living experience? But those houses are now all averaging at $272,900, too. It seems that in the end you didn't really make anything in your investment.
The only advantage you would seemingly get is to put the new home on another 30 year mortgage from the bank, to be paid off in monthly payments, and enjoy your money in the present. But now you are merely living on borrowed money, not your own. Eventually you will need to have to pay off your new home with your money, old or new, or the bank will take it back and claim what is theirs, all profits from your home investment strategy eventually equaling zero.