It’s understandable to feel a little bit gun-shy about the real estate market, especially in light of the recent real estate crash that happened in 2008. Many American homeowners are still grappling with the aftermath of that financial crash. Many people are still trying to get out from under huge debts, huge losses, and in the case of many others, mental trauma.
It can be psychologically trying seeing your hard earned money and everything you’ve worked for go up in smoke, and that is exactly what happened during the financial crash of 2008. It’s only been recently that the housing market in the United States is showing some signs of life. Indeed, a lot of people are beginning to start flipping houses again. Credit scores are on the rise as people begin to pay off their credit card debt and save money. Let’s hope that another housing bubble doesn’t develop all too soon and we end up where we started.
Regardless of whatever psychological trauma you may have experienced from the recent financial crash and housing bust, there are a lot of good reasons why you need to buy a house. Here are the top five reasons why you need to buy a house:
1. Investment Nest Egg
You have to look at your house as your nest egg. Just because the prices are low now doesn’t mean that they will stay low. People stay in their houses for extended periods of time. So if you have a long time horizon and you see yourself living in your house for maybe ten, fifteen, or twenty years, regardless of the price now, its a good idea to buy now. Why? The price of your house is probably going to be double or even triple twenty, thirty years from now. Thats the power of inflation. So instead of waiting until then, buy it now because it will cost you a lot more money to buy in the future.
2. Hedge Against Inflation
Instead of putting your money in the bank and having inflation rot your money, put it in your house. Real estate has historically been one of the most powerful hedges against inflation. This makes a lot of sense because the supply of land doesn’t increase, while the general population increases with time. Because of this dynamic, there will always be a demand for housing. As a result, real estate will always beat inflation. Sure, they may be hiccups once in a while like the most recent housing crash. But over the long haul, you will always win if you bet on real estate.
3. You Can Use It While It Appreciates
Unlike other investments, you can live in your house while it goes up in value. You can’t do that with other investments. You have to store them. If you invest in gold, you cant use gold bars while youre waiting for them to appreciate. You can, however, hang out at your house and enjoy your house while it appreciates in value. This is one of the main reasons why people invest in a primary residence. Sure, moving expenses can cost quite a bit and then there’s the hassle of moving, but nothing beats the feeling of owning your own home and not paying someone else’s mortgage off.
4. Mortgage Interest Deduction
In the United States, the interest you pay on your mortgage to pay off your home is tax deductible. This can work to your advantage especially if you earn over a certain amount. We could all use as much tax deductions as we can, and a mortgage interest deduction is a great way to save on taxes. For the first several years of your home loan, most of what you pay will end up being interest only, so you stand to save quite a bit whenever April 15th rolls around. You can easily calculate the savings using a free online tax tool.
5. Pride of Ownership / Keeping Up With The Jones’
Lets face it; were all humans. We dont want to feel like were being left behind. If your neighbor rolls up in a BMW, the first thought that comes into your mind is to get yourself your own BMW. Thats how we are. Dont fight it, dont deny it. Just roll with it. In fact, keeping up with the Joneses might even push you to earn more money and to exert yourself more.
Instead of being envious or jealous of your neighbor, put in the work; work an extra job, or try to earn more money at your job, and get what they have. This works with cars, clothes, and it definitely works with housing. So if you live in an apartment and your floor mates get a house, it may be your turn next month or next year; but dont feel that this is you just trying to keep up. It might actually be your neighbors pushing you to take your life to the next level.