Years ago buying a home was a smart investment, especially if you planned to live there for 5 years or more. You would often hear people say that buying a home is a good investment because over time you will build equity. They counted on the fact that as you paid your mortgage the amount you owed on the house would go down and over time the value of the house would go up. Add that to the down payment that you made on the house when you purchased it and you now have equity in a home.
The problem with that is that no one can ever predict the future and over the last several years the economy has been quite volatile and the housing market has become quite unstable. We don’t know from one month to the next if the value of our home will increase or decrease.
In fact many people have found that instead of the value of their home increasing, as most people expect to happen after a number of years, the value of their house has actually fallen. In some cases people have found that the value of their house is even less than what they owe on their mortgage.
So that brings us back to the question – is buying a home a good investment?
After everything we have been through in the last 6 years, and even though mortgage rates are extremely low, I would say that buying a home right now is not a good investment.
The economy has not sorted itself out yet. Actually many investors predict that it is still going to get worse before it gets better. And if you add in the debt crises that Europe is currently struggling with, the predictions could be correct.
Again, no one can be a 100% sure on what the future of holds, but if you are shopping for a new house right now, you may want to hold off until we begin seeing better indications of an economy that is in fact recovering from the financial mess of the last several years.