Wednesday, November 16, 2011

The American Dream (and Other Benefits of Owning a Home)

Realtors, mortgage lenders, economists and all sorts of other professionals who have a little skin in the game are quick to tell you to buy a home, if you can.  I believe most people who are sitting on the fence have some sort of apprehension, thinking of all the headaches along the way.  Homeownership, as it stands today, has a mistaken reputation.  "Foreclosures", "Short Sales" and other distressed home lingo dominate the headlines.  What is interesting is a recent poll by the National Association of Realtors (NAR) finding that 95% of homeowners and a surprising 72% of renters say that owning a home for a period of several years is a far better financial decision than renting.  77% of homeowners also mentioned that simply owning a home is the biggest contributor to their long term financial goals. 

So with all the naysayers, sitting in their towers, naysaying, I thought I'd come along and mention some of the beautiful reasons why owning a home is so beneficial:

1)  Tax Advantages
Ok, so when I mention tax advantages, most people glaze over and check the next line item.  Before you get there, take a second to see what kind of money homeownership will save you.  To be fair, to get the majority of tax advantages, you need to have a mortgage (i.e. debt).  Since the mass majority of us need some "help" in the form of a loan, I'll assume we all have a mortgage.  With that mortgage, every month you pay a portion of "principal" and "interest".  Your mortgage interest is tax deductible.  In the early years of a mortgage, the majority of your payment is interest, so especially when you first buy a home, your mortgage interest deductions are much greater.  Say you have a $1200 dollar payment.  About $1080 per month is interest and is deductible, so over a year, it reduces your taxable income about $13,000 per year.  Pretty nice, eh?  Among other great tax deductions are your property taxes, mortgage related closing costs and home equity lines of credit interest.  It really starts to add up.

2)  Financial and Physical Security and Stability
One major difference between buying and renting is that when you own your home, chances are you have a fixed mortgage that will never increase.  How many times have you been in a rental apartment and you were certain that your landlord wouldn't raise your rent?  Could you guarantee that your rent wouldn't be raised over the next 30 years?  Unless your landlord is your Mom and you live in her basement, you would be crazy to think that.  That's what is great about homeownership.  You can always count on a stable payment every month, that won't go up (unless you have an Adjustable Rate Mortgage).  Beyond just financial security and stability comes physical security.  A study by NAR revealed that with more homeowners and less renters, neighborhood turnover rates were lower.  With lower turnover rates, less crime was being committed and reported.  Turns out that since homeowners are more consistent neighborhood stewards, riff-raff was more likely deterred. 

3)  The American Dream
Homeownership comes with a myriad of advantages.  The most well known, and most attacked idea, is the notion of owning the American Dream.  Homeownership provides you the luxury of planting roots, settling down and focusing on the more important things in life.  NAR studies show that homeowners are more likely to volunteer and contribute to neighborhoods and communities.  Their children are more likely to participate in organized activities and actually watch less TV.  Now there is a novel idea!  From my own experience, I can say that homeownership keeps you grounded and gives you a sense of belonging.  My parents still live in the very first home they bought over 30 years ago.  All of my memories revolve around that home from birthdays to Christmases, all the good (and bad) times.  I truly believe a home is what helps solidify a family.  On top of stronger, more engaged families, homeowners have a sense of pride in their home and their neighborhood.  They want to build relationships with neighbors and they want to keep their homes in good shape.  Homeownership isn't merely an action, it is a state of mind.

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