Is Buying a House Worth It?
Location, location, location. Diversification, diversification, diversification. And, know thy self! When trying to determine whether owning a home is the right move for you, these are three of the most important things to keep in mind. First and foremost, I would say, know thy self. Are you risk adverse? What are your personal goals and what do you need to achieve those goals? Are you looking to put down roots? Are you looking to not be priced out of the rental market in another year or two? Are you looking for a solid asset that will not lose its value (more on location, location, location will play into that point)? Are you looking to travel but want a place to park your extra money? These are the kinds of questions and answers that you really need to get clear on. Buying a home is not the right move for everyone but for many, owning a home can be a perfect fit for achieving some of their life goals.
The next point to consider is diversification. If you are already putting money into a retirement account, the stock market, and other potential investment funds, then adding a home to your investment portfolio could be a next good step. It’s true that putting all of your eggs in one basket can leave you vulnerable. Having diversification; a mix of assets that make you less vulnerable to the whims of the market is a good idea. When it comes to choosing to invest in housing, keep in mind that everyone needs a place to live. So whether you plan on purchasing a home for yourself or plan to rent it out, a house is one investment vehicle whose value tends to be less volatile than others.
Tied to that last point is where location, location, location becomes an important consideration. During the last economic recession, the values of all homes around the country were not affected equally. Boulder in particular remained strong and continues to do so during this latest economic downturn due to Covid-19. When considering whether purchasing in a particular location is a good idea, here are some points to consider:
Is there a diverse job market in your area? Or, for instance, is the economy heavily reliant on tourism or tech or a university?
Is there the opportunity for more housing construction? During the last economic recession, home values in Las Vegas were hit hard not just because the economy was so reliant on tourism but also because there was so much consistent construction of homes. More supply tends to drive down price.
What are the projections for population growth? A steady increase in demand will keep prices high, and depending on supply, even drive prices up.
What is the quality of life in your area? Even with a poor economy, a place where the quality of life is high will contribute to people still wanting to remain in or move to the area.
If you have decided that purchasing a home is the right financial move for you, the last piece of advice I’d like to leave you with is to make sure you are living within your financial means and at least considering a 15 year mortgage or paying down your 30 year mortgage quicker, if you can. The first will save you stress when the economy invariable goes through its next downturn and the second could save you thousands, if not tens of thousands, of dollars over the life of your loan. Talk with your lender to learn more about what you could afford and the different types of loans and payment plan options available to you. Don’t just shop at the top of your budget and assume a 30-year mortgage is the way to go. At the very least, take sometime to consider your options just as you have taken the time to consider whether owning a home is the right move for you.
Happy (potential) home buying!
