According to a 2011 poll of likely voters, commissioned by the National Association of Realtors, 75% of respondents said they believed owning a home is worth the risk of potential market fluctuations. Of those respondents who already owned a home, an even higher number, 95%, stated they were happy with their decision to purchase their home.
The good feelings towards home-ownership extend to potential buyers as well. 73% of those who do not currently own a home view the purchase of a home as a goal for the future. Most respondents also agree that their home is their best investment, adding that they would advise a friend or family memeber to buy a home. One of the reasons cited for the lack of first-time buyers entering the housing market: difficult saving up for a down payment and closing. Combined, these costs are seen as the biggest barrier to home ownership today.
A 2008 book by authors Gary Smith, Pomona’s Fletcher Jones Professor of Economics, and wife Paula, a business economist from Harvard, reflects similiar sentiments. According to their research, as reported in “Homeconomics: Why Owning a Home Is Still a Great Investment,” buying a home offers as many benefits today as it always has. These benefits include providing shelter and a place to live, as well as providing the “fun” and enjoyment of home ownership. The economists are quick to note the financial benefits as well, labeling them as the home dividend. The dividend is described by the authors in the following manner.
A “home dividend” is the owners’ rent savings for a comparable house in the same neighborhood, plus mortgage interest and property tax deductions, minus the mortgage payment, property tax and attendant insurance and maintenance costs.
Rents are often higher than mortgage payments, since rents increase over time, while mortgages with fixed rates stay flat. When the two amounts are subtracted, the difference between them is the amount of the monthly dividend. This extra money can be saved an invested in the stock market, bonds, business opportunities or educational opportunities for family members. If the dividend earns even a modest rate of return, it can generate an additional source of wealth for the homeowner.
This inherent dividend explains why the average homeowner has a net worth of $200,000, while the average renters worth is closer to $5,000, according to the two economists.
In addition to the financial benefits of homeownership, however, people also report a strong emotional connection to their home. It is viewed as a place for rest, relaxation and enjoying the company of family and friends. Seen from this perspective, owning a home is reported as an important core value for many families.
Far from giving up on the American Dream, many people still embrace it, and view the purchase of a home as a way to save for retirement, as well as a place to hang their hat well into the future.
from Teck Inspections August 2011 newsletter