A home mortgage was known as “the most significant investment a person ever makes” for decades. Next there was a housing crisis that’s been here way too long. Overinflated home values soon became artificially low home prices. Sales of homes haven’t been this low in 15 years. Prices on homes are going down making deflation concerns go up. A Federal Reserve official gave an opinion on the matter. Home investments are poor investments. Purchasing a home can confuse people when it comes to deciding what is an expense and what is an investment. This was suggested by a financial expert. Source for this article – The days of homebuying as an investment opportunity are long gone by Personal Money Store.
Housing investment being a bad investment
The end of the 20th century showed a large amount of wealth in real estate. Experts believe that it will never be as good as that. A 12 month supply, or two times the quantity of a healthy housing market, is where the inventory of homes may rise to, the New York Times reports. After losing 30 percent in value already, sellers are losing more value on homes. Dean Baker, co-director of the Center for Economic and Policy Research, told the Times it may need 20 years to recoup $ 6 trillion in housing wealth lost since 2005. Adjusting for inflation, home values will never catch up.
Considering housing a living expense
When assuming a house is an investment, one is making a huge personal finance mistake. This is the opinion of Charlie Farrell from CBS Money Watch. Farrell suggests considering housing costs as a cost of living that is needed. A house is a depreciating asset, just like a car. Unless money is continuously added to the home, it will lose a ton of value. Economists thinks home values will barely stay with inflation within the next 20 years. The investment of a mortgage won’t go up. The return will only be what is put into it. There is certainly maintenance and taxes on a home, regardless of whether it is paid off. That means you’re likely to get less overall out of your home than you put into it.
Having a mortgage
Thomas Hoenig who is the president of Federal Reserve Bank of Kansas City explained the U.S. housing market isn’t really someplace you should be putting your money as an investment. He explained at a hearing held by the House Financial Services Committee’s oversight and investigations subcommittee, “If the American people are looking at the housing market to be their investment opportunity, I think they’re making a mistake.”. With a 4.5 percent loan rate of interest, Linda Stern thinks that it could be a good idea to get a home and have others pay for it with rent, although she admits Hoenig is right. Stern works at CBS Money Watch as well. Paying rent for 30 years returns nothing. With a mortgage, there’s a house at the end of the tunnel. Regardless of what it is worth, it’s something.
CBS Money Watch
moneywatch.bnet.com/retirement-planning/blog/retirement-roadmap/housing-dont-confuse-an-expense-with-an-investment/3376/
CBS Money Watch
moneywatch.bnet.com/economic-news/blog/daily-money/is-housing-still-a-good-investment/1259/
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