People purchase a new house for a variety of reasons. There are those who got tired of renting a house and decided to purchase a new one thru straight cash or via mortgage loans. There are also those who buy a new as they looked at it as a form of investment, turning a traditional home into a multi-door apartment, which is, by the way, a very good source of passive income. However, over the past couple of years, home prices have gone up significant numbers that at some point, real estate investors, as well as home buyers, are now having second thoughts if housing is still a good investment.
Well, it depends on what type of buyer you are as they have different reasons for buying a property. Thierry Godard of Smart Asset published an article directed towards first-time home buyers. Whether it is a good investment or not, read the article below to know the answer.
5 Reasons Why Your First Home Should be an Investment Property
Here are five reasons why you should entertain the idea of investing in real estate while you’re still young.
1. You’re Young
Being young and independent can be pretty amazing. You can make your own rules, live where you want, buy what you want and travel whenever you want. But that can get old pretty quickly, especially if you have other goals in mind.
If you can learn how to effectively manage your money, you can come up with enough cash for a down payment.
2. Real Estate Is Cheap
According to recent reports from National Association of Realtors home prices are on the rise. However, most real estate markets present many bargains to potential buyers in the form of distressed sales. Distressed sales are homes or properties that have usually been foreclosed on that the bank is willing to sell at a loss in order to clear its books. These distressed sales also help drive down the cost of all properties in the area.
There are plenty of distressed homes for sale. Buying one would allow you to own an investment for significantly less than market value, especially as prices begin to rise. Before buying any property, however, it’s important to make sure you purchase a house that you can afford.
3. You’ll Have Another Source of Income
If you are purchasing a property that you plan to rent out, you’ll be able to profit off your investment as soon as you find tenants. Then you can take the money you earn and reinvest it in your property or use it to pay off other bills and debts.
A tip from the real estate experts: first-time home buyers must look at their very first home purchase as an investment, especially if you bought it at a young age. Being young means that you have all the time in the world to have multiple sources of income to pay a mortgage while enjoying life. In addition, investing for the long-term will make real estate price much cheaper in the long run. These and more are some of the reasons why first-time home buyers should treat it as an investment.
Now, what about those that do not fall into this category? Well, it depends on the situation the buyer is in to. There are those who believe that it is not a good investment while there are also those who think otherwise. Jamie Hopkins of Forbes explains why buying a home is not a good investment, to begin with.
Why Buying A Home Is Not A Good Investment (It’s A Service)
Image Courtesy of Forbes.com
One popular housing mantra that almost everyone is familiar with is “location, location, location.” This quote, often attributed to a British real estate tycoon named Lord Harold Samuel, has been used to express the notion that there is only one thing that is important when investing in real estate, and that is location. This common phrase has persisted over the years and is still widely used by real estate agents today when helping potential homeowners find the right home. The whole notion, however, might be based on the faulty premise that buying a house is a good investment.
Let us start with a look at current housing investment returns. The S&P CoreLogic Case-Shiller National Home Price Index increased to 6.2% in September, beating many estimates and the previous month’s 5.9%. In the 20-city index, home prices increased in all cities for September and posted an annual gain of 6.2%. As home equity is the largest asset for most Americans, far outpacing average investable assets for most people, the 6.2% annual return should be welcome news. The higher than expected home price increases have been boosted by low unemployment, low home inventory, and historically low interest rates. Compared to the stock market, however, housing is providing substantially lower returns. Both the S&P and the Dow have provided annual returns in 2017 of over 18%.
While the stock market might represent a better short term return, most people would list their home as a safer asset than market investments. Most investors recognize that the stock market is volatile and can be risky. Returns for market investments need to be higher than safer assets due in part to their higher volatility and risk. So, if the home is a safe asset, it might still be a good investment. Unfortunately, the home is also not a safe investment. Learn more here…
There are several good reasons why purchasing a house is not a good investment, especially if it is purchased as an investment. First is the property location. It is the most important factor to consider when buying a property for investing. Over the past years, the housing investment is providing substantially lower returns than other investments like the stock market. As far as returns for the short-term is concerned, housing is not a safe investment.
On the other side of the coin, in an article written by Jessica Guerin of Housing Wire, the majority of the Americans actually view housing as a good investment option according to a survey about consumer expectations. Learn more about this story below.
A Silver Lining: Most Americans Still View Housing as a Good Investment
Image Source: Housing Wire
A majority of Americans – 65% – think it is still a good idea to invest in a home, according to the latest survey of consumer expectations of housing by the Federal Reserve Bank of New York.
While this hasn’t changed much from last year, the attitudes of younger Americans have, as respondents from this generation were less enthusiastic about housing as an investment and a greater share of them labeled it a bad investment.
This gives credence to a recent Wall Street Journal article suggesting that that wave of Millennial homeowners everyone is anticipating may turn out to be no more than a ripple as a number of factors – including banks’ reluctance to make small loans and a general preference toward urban life – seemingly make homeownership less appealing for the younger set.
According to the survey, a majority of renters still think getting a mortgage is difficult, but things may be improving as the share of those who considered it easy rose above 21% for the first time in at least four years.
Home price expectations have fallen, though, the survey revealed, with the one-year outlook down 1% from last year and the five-year outlook down nearly the same.
65% of Americans still think that investing in a home is a good idea based on the recent survey of consumer expectations. However, for younger adults, it’s a different story. They are less enthusiastic about the idea of buying a property as a form of real estate investment. While they still view housing as a good investment, they are a bit cautious with their home price expectations. Overall, this is still a very good sign as the majority of Americans are still looking forward to real estate investing.
If you’re one of those who firmly believe that housing is a good investment and you’re looking for affordable homes for sale in a prime location, Dependable Homebuyers can help you find best home deals in Baltimore, Nashville, San Antonio, and Washington D.C areas. To know more about us, visit https://www.dependablehomebuyers.com. Looking forward to hearing from you.
