People talk about any increase in the value of their homes as if it were profit. But unless you have died or are otherwise leaving the property market, it isn't: you will usually be paying a similar %age increase in the price of your next home. And since most people (prior to retirement) move up the housing ladder, translated into dollars, that percentage increase often more than wipes out any nominal "profit".
The reality is that house purchase sets most people on the credit treadmill more surely that anything else in their lives. Particularly when people see prices rising and are tempted to take the maximum loan they can afford, they can end up with nothing if anything goes wrong. Many suffer less dramatically, but are forced to use other, more expensive forms of credit, to get by.
In Long-Term Perspectives on the Current Boom in Home Prices Robert Shiller of Yale University points out that US house prices - in real terms - were almost unchanged between 1900 and 2000. From that perspective it is almost impossible to see the astonishing leap in prices since 2000 (which seems to have blinded people to that longer term reality), as anything other than a bubble waiting to burst in a very big way.
Owning a home is not only about its investment value (or otherwise). You can, for example, personalize a home you are buying in ways which you may not be allowed to do if you live in a rented home. But there are also practical downsides, such as once you "own" a home, you will likely be less willing to pursue opportunities if they involve a move.
As this article in the Denver Post a couple of days ago suggests, home ownership is becoming a nightmare for many people. "Fed officials heard stories from Denver, Cleveland, Philadelphia and New York, where neighborhoods are deteriorating as borrowers struggle to pay loans or abandon their homes in foreclosure". "Some 1.2 million foreclosures were reported nationwide last year, up 42 percent from 2005, according to Irvine, Calif.-based RealtyTrac".
The reality is that house purchase sets most people on the credit treadmill more surely that anything else in their lives. Particularly when people see prices rising and are tempted to take the maximum loan they can afford, they can end up with nothing if anything goes wrong. Many suffer less dramatically, but are forced to use other, more expensive forms of credit, to get by.
In Long-Term Perspectives on the Current Boom in Home Prices Robert Shiller of Yale University points out that US house prices - in real terms - were almost unchanged between 1900 and 2000. From that perspective it is almost impossible to see the astonishing leap in prices since 2000 (which seems to have blinded people to that longer term reality), as anything other than a bubble waiting to burst in a very big way.
Owning a home is not only about its investment value (or otherwise). You can, for example, personalize a home you are buying in ways which you may not be allowed to do if you live in a rented home. But there are also practical downsides, such as once you "own" a home, you will likely be less willing to pursue opportunities if they involve a move.
As this article in the Denver Post a couple of days ago suggests, home ownership is becoming a nightmare for many people. "Fed officials heard stories from Denver, Cleveland, Philadelphia and New York, where neighborhoods are deteriorating as borrowers struggle to pay loans or abandon their homes in foreclosure". "Some 1.2 million foreclosures were reported nationwide last year, up 42 percent from 2005, according to Irvine, Calif.-based RealtyTrac".
Buying a house is better than spending it on things. It just IMO not as good an investment most people portray it to be.
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