Is Buying a Home a Good Investment? Ken Fisher Answers
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- Опубліковано 7 січ 2021
- Is buying a house a good investment? The answer depends a lot on you, your situation and preferences. To gauge whether it was a good investment or not, many people simply compare the sticker prices from when they purchased the home and when they sold-but that doesn’t take into consideration the maintenance costs, interest costs, utilities, and more. After factoring in all the costs that go into maintaining a home, the return on a home varies greatly.
Sometimes a home can turn out to be a good investment, but other times, you may be better off simply investing in stocks or other financial securities. There simply isn’t a blanket rule for whether buying a home is a good investment-it depends on you, your home and your future circumstances.
If you would like to learn more of Ken Fisher’s and Fisher Investments’ thoughts on investing and where markets could go from here, visit us at www.fisherinvestments.com/en-us.
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Home owner here, I never thought of it as an investment, just a place to hang my hat.
As someone who owns 12 rental houses but never been married I see endless parallels to Ken's analogy. Awesome :)
Never thought of it like this before.
I think it is different in other countries. The UK market has given a sound return over the years but I do agree most don't take into account mortgage etc. My first mortgage in the 80's was at 13% and my last one was 0.4%. You do need to determine whether it is a home or a rental as they are completely different reasons to buy and present.
The final point (sorry!) UK housing has never suffered a bear market scenario in the post war period.
Houses are a recurring investment.you invest in them constantly. I’ve lived in my home since 1994, so 27 years. Very lucky to have bought in 1994 which was a low for the real estate markets. The big challenge is how does owning a home affect your career prospects. Too many people get so attached to the home that they surrender flexibility on where they work. They only consider jobs they can commute to from the home. I did not. My home was where I tried to get back to on weekends and it gave my wife and daughter stability. I went into consulting and racked up the frequent flier miles. So the trade off is the loss of flexibility in your earning power. I’ve often wished someone would develop some kind of REIT that allowed an investor to realize part of his return in the form of rent expense reduction in a variety of locations around the country. That way an investor could invest in real estate, be a hybrid owner/renter, but as with time-sharing condominiums, keep the flexibility to change residences when a career opportunity emerged in a different market without incurring the cost of buying and selling a single family home.
Things I believe he is missing. When you look at the cost, you also have to consider the cost of not buying a home, like paying rent and utilities. Where I live, the rent I would need to pay would be near or more (and going up) than the interest and taxes. Where you live makes a big different. He right the housing market is different in Texas then California. I know people that moved to TX from CA and thought it was the same. They lost big time.
Sometimes I wonder if people that leave comments even watched the video they're commenting on or if they simply are that bad at comprehension, he's not missing anything, he's fully aware of all that, and that's exactly what he said. The whole point of the video is "it depends", sometimes it's a good investment and sometimes it's not, it depends on you, your surroundings, circumstances, etc."
"that's a little bit like saying is getting married a good idea?" Awesome :)
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One can also look at the opportunity cost of not owning a home and simply paying rent every month. There is intangible satisfaction in having a "nest" and also some tax benefits during ownership and at time of sale.
A house is much more than a $ investment. It is a lifestyle and quality of life investment. And, it supports the economy as homeowners fix up houses to make them personal homes, replace roofs, a/c and other things. I estimate that about 1/3 of my mortgage payment was covered by income tax savings. A home also providers owners with access to home equity lines of credit. It would cost me more to rent an apt or house than to pay annual expenses (taxes, utilities, other) associated with a house that the mortgage is paid off.
In this accounting, where are the expenses of living somewhere included?
The rent you would have paid and thus saved by owning one's home should be part of the consideration. It is a year by year profit that is tax free.
Ken's a smart guy so it's always surprising to me when he talks about this. He's not wrong, but what he doesn't talk about (purely in terms of a financial "investment") is leverage, which is the primary driver in this case for your ROI. If someone buys a home (preferably in a neutral or buyer's market, which is NOT now), and say puts down 10% they have a 10x leverage factor. RE is/should IMO be thought of as a long term investment but for a simple example if someone purchased a home and it went up 5% in a year, your ROI based on the just the equity increase in the home just went up 50%, so if your rent compared to buying cost are even close, that pretty much blows away any other investment. When you do the math and extrapolate over 10-15 years and include the forced savings (from paying down the mortgage), mortgage interest write-off, it's hard to go wrong (particularly if you can ride out the down times and think long term). If you do the math, you simply cannot save fast enough to keep up with this increase in your net worth from the percentage rise in equity. When to buy is another discussion, but that is really driven by your monthly cash flow situation and the market in general.
BTW, the other thing not mentioned is that when you purchase with a 30-yr fixed interest rate, your primary PI (principal/interest) payment is fixed for the next 30 years, unlike rent which historically will outpace inflation, so in terms of cash flow that is a big deal as the years go by. Plus the option to re-fi at a lower rate and either lower your payment even further, or keep your payment the same and accelerate the pay-off may be an option in the future.
I agree with what he said....but, if you are actually living in the home, and you have bought new or in an established upscale neighborhood and housing cost continue to rise, and you owe less than what it would cost to sell your home and pay off your current mortgage than it is worth it. If you buy a home in a crime ridden neighborhood that has has bunch of rundown homes and try to flip it for 20% over what another home may be selling for than you will probably fail. Location and timing.
What I've advised my kids is that buying a home should be considered a lifestyle decision. It may or may not be a great financial decision, the reason to do it is that you want to own your home. You want to be able to decorate to your taste. You want to be able to make changes, or not, based entirely on your own whims. you want to stability that comes from a largely fixed payment and no lease.
If you would prefer to avoid those things, there's a good chance you'd do better to rent a minimal apartment that meets your needs and invest the difference in stocks.
One has to live somewhere. That is a cost that needs to be part of the evaluation. Rent does go up every year and at a much higher rate than inflation. Look at it this way, what if you could lock your rent dor 30 years. Very true, the evaluation has to be made in a case by case basis. But the peace of mind of owning a home free and clear in kind of priceless.
So renting a house pay someone else rent and every year the rent goes up kinda stupid if you ask me
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You can’t compare a house or paying rent to “other investments”. It’s not like you can elect to not have a home.
There is a non monetary value of owning a home. And it's especially valuable if you have lots of "stuff." No one, except possibly the government with its right of eminent domain, can tell you to get out. As a homeowner with a 4 car garage which none of my cars fit into, I worry about these things! LOL
I never thought it was good to buy house from investment point of view but when you're married ...................
Well yeah, it's like saying my car is an investment. It's only an investment if you buy to rent it out.
a mortgage that you are paying for is a liability not an asset.
This is misinformation.
He is not making any difference between buying your first house and buy-to-rent.
Your first house is an asset that covers your primary need and give you the comfort nobody can send you away because wants to use or sell that asset. That would put you through a moving that it is categorised as one of the most stressfull things in life. It would also give you to chance to design the house in the way you want.
These benefits are intangible and make buying your first house a hell of investment even though you may come up loosing from a financial point of view.
Buy to rent is a completely different story as Warren says it is not good because of taxation level property has.