If you are part of the baby boom generation, you’ve heard, time after time, that your home is one of the biggest investments you’ll make. That’s one of the Big Lies of our generation. It may well be one of the biggest purchases you’ll ever make, but if you live in it, it is not really an investment at all. There are plenty of good reasons to own a home, but let’s reserve the term investment for those in which we expect a financial return.
We all have to live somewhere, and meeting that basic need is a cost, whether you rent or buy. The decision to rent or buy is one of minimizing that cost of living. Sometimes it’s cheaper to buy, but it’s still not an investment.
Does that mean there is no reason to buy? Of course not. There is a satisfaction in owning one’s residence. Some people feel secure knowing they own title to their own spot. But that feeling is what you buy. It’s a luxury, and we should all treat ourselves to the luxuries that we can afford and that make life enjoyable.
Looking backwards, the past 50 years have been inflationary for housing, and if you were lucky enough to borrow big and get bailed out by inflation along the way; good for you! And so what! You still have to live somewhere, and unless you plan to sell the home, take your chips off the table, and rent, you’re no further ahead in the game financially.
In fact, since the past generation has been so favorable to home buyers, it’s unlikely to be quite such a good deal going forward. The constantly growing baby-boom generation fed growing demand and hence rising prices. As more boomers retire (or try to and move to smaller abodes) the process works in reverse. There will be more sellers than buyers. That’s a set of circumstances that usually drives prices down.
Still want to buy?
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