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Home Ownership Not an Asset? WHAT!?

A lot of people have been saying, with the downfall of the housing market (temporary, not permanent, mind you), that owning a home has become more of a liability than an asset. What they don’t consider is that it is still an investment. The definition of an investment is something that you buy, and over time that asset aquires value beyond what you initially invested in it.

A home is not something you should buy and expect to get a return on your money in even a few years. With home shows showing how people make thousands of dollars, and the flipping pheonomenon catching fire, it seems like a lot of people have lost the perspective you need to have on home ownership.

Home ownership is a deeply personal decision. While it is true that home ownership is often a lot more expensive than renting, because you are responsible if anything breaks or needs maintenance, you still are paying on something that you OWN.

You are not making some landlord rich. Your landlord knows that real estate can make you rich, he’s no dummy, and he’s making money off of you every month. However, this is not to say that home ownership is for everybody.

It totally depends on your personal situation. Are you in a position where you can have a few thousand dollars saved at any given time so that you may fix things when they go wrong, or have the extra cushion when money is a little tight to make the mortgage payment.

Home ownership definitely requires a little discipline, and if you are accustomed to spending money on things, then it may not be the right choice for you. Comments like the one that the Bank of America CEO made recently about how owning a home does not mean you own an asset just make me mad.

It’s downright misleading. But it’s also downright misleading to make people think that home ownership is something everyone should do. It is not something that is the right financial choice for everyone, as evidenced by our massive overstock in home inventory right now and that huge rate of default.

When taken out of context, the Bofa CEO’s comments may have seemed pointed, but what he was really saying is that you shouldn’t always think of a home as an investment, but rather as a great place to live. The problem now is that everyone expects it to be an instant asset, and it often is more of a liability until you get some of the principle paid down and begin to build equity.

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