Should you consider your primary residence an investment?
First off, I am not qualified to give financial advice; I am sharing my considered opinion.
I wrote a post in January titled Now is the Perfect Storm for Buying real estate. I received the following comment on that post (skip to where I bolded if you like):
"An opinion from someone who does not make money selling real estate is needed here. This market won't bottom for at least another 12 - 20 years. We are at the precipice of a world wide depression that will make The Great Depression look like a walk in the park. When it does finally bottom it isn't just going to shoot back up... housing prices will most likely stay low for a while. The only real estate broker I trust is actually advising people to "RENT RENT RENT". That is someone who you can trust. Here are links to my website and blog: (I deleted them...I don't need to have this persons spam in my post when it's already in my comments). You should really educate yourself on how bad this real estate collapse is going to be before you start telling people that this is a good time to buy. Please understand that my intentions are not to offend but inform you that you're giving bad advise. After all, a home IS an investment."
The commentator believes the market is not going to bottom for 12-20 years and that the only broker he respects is the one who is saying rent, rent, rent. I'm stupefied that anyone would think it's sound advice for someone who is purchasing a home responsibly, i.e., making sure they can comfortably afford their payments, not using negative amortization, have a secure job (this may be hard to determine), etc., to not do so for 12-20 years. Homeownership, if done responsibly, is one of lifes greatest joys and "The American Dream."
This reminds me of an incident that happened to an acquaintance of mine. She belonged to a group who believed the world was going to end, literally, at some point in the 1950's. She was instructed to sell her belongings, including her home and was further told not to have any children because it would be irresponsible to bring children into the world when it is going to end. Needless to say, the world did not end. She no longer belongs to that group.
Imagine waiting 12-20 years to purchase a home only to find they went back up in price and now you can never afford to buy.
My contention is this, your home is the place you live, it gives you shelter, protection against the elements, a place to safely lay your head at night, somewhere to hang your clothes, watch the Superbowl, etc.
If nothing else, the downturn in the economy has shown that it's only safe to treat your home as an investment in a rising market, and therein lies the risk, you can't time the market.Wikipedia says: An investment is the choice by the individual to risk his savings with the hope of gain. Rather than store the good produced, or its money equivalent, the investor chooses to use that good either to create a durable consumer or producer good, or to lend the original saved good to another in exchange for either interest or a share of the profits.
Investments are by nature, fraught with risk, of course some are mitigated better than others, like a standard savings account in a bank, but even that's not low-risk anymore. Let's face it, you will need shelter no matter what and risking your shelter is not wise in any situation.
Now I want you to know I am the "pot calling the kettle black." My husband and I built a spec home that we are living in and it's not pleasant. What makes it especially distasteful is I knew to, "never consider your primary residence an investment"; "do not put your home at risk," and a few more catch phrases I haven't done, but who knows, there's still time, such as: "do not use your home to fund your lifestyle," and "do not use it to pay off your credit cards and car," (I know plenty of financial advisers disagree with this, but let's face it, the average individual is not a professional financier who is going to get a HELOC and follow the payment plan).
In closing, I personally know the risks involved with using your home as an investment. It was great selling my previous home at the height of the market and raking in the dough, but it isn't fun being stuck with a high mortgage in a declining market. Better to keep your house payment affordable, and invest money that you can afford to put at risk.
I'd love to hear your opinion, but please do not spam my post. Thanks.
Thank you for stopping by. Your comments on this post are welcomed and appreciated.
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