Low interest rates have made owning a home more affordable than ever, yet ownership across the United States is at historically low levels.
The case for owning a home comes down to rent and inflation. If you can buy now, you can lock in low interest rates. Of course, that’s what the mortgage brokers say. The truth is that low interest rates have actually caused higher inflation than we see on a macro level. Low interest rates means that money is artificially being pumped into the system.
If rates continue, the value of currency (USD) itself will continue to erode against other assets and real money (e.g. gold). This is the reason bitcoin and other cryptocurrencies are on such a tear, not because they are ushering in some great technological advancement, but because the system of money as we know it is bs.
Buying a home locks in your payment, where as rents will rise. Buying a home puts you inside your savings account. In most places, the value of a house will match or beat inflation, which is better than a savings account. Your home’s value will also outpace the average rise in earnings as well.
In 1980, the median home value was $47,200, while the average wage was $12,513. Fast forward to today and your average home has risen 7x while your wage is up only 3.8x. In other words, if you invest in a home today, you will pay less over time for an asset that appreciates faster than your wages. A pretty good deal.
Owning a home is not an investment, it’s a liability until it becomes an asset. If it were possible to put the same amount of cash into a stock account as you do your home every month, you’d create 2x more money annually, but that’s not reality. The reality is everyone needs a place to live, to call home, and if you can afford it, buy buy buy.
The Bottom Line: Home ownership is a good deal regardless of how expensive it seems right now. The prices 30 years from now will (probably) not be cheaper.