Is buying a house always a good investment?

Question

My parents always say that a house is one of the few things that typically goes up in value over time, but can it be a bad idea for some people?

Answer 1

While property is often a good investment, it has its drawbacks as well, and is not for everyone.

Typically, real property appreciates faster than other investments, and depending on the type of property, it can also pay some of its own upkeep and operating expenses.

However, it is not a good investment for someone that needs liquidity (the ability to get at the money quickly), or who intends to make a quick profit, as the real estate market fluctuates, and there are times (now, for example) when properties may take much longer to sell, and may actually drop in value for a time.

Buying your home is probably the best property investment, as you will need to spend money to get a place to live anyway, but even here, there are exceptions.

If you do not have definite plans to stay in one area for a period of at least a few years, the costs involved in buying and selling real estate can easily offset any profit. Additionally, first time home buyers often find themselves unprepared for the problems of home ownership.

In general, however, most people find that the benefits of home ownership far outweigh the problems. Choose carefully, have inspections done and don't buy more home than you can afford, and you'll find that owning your home is far better than renting.

Answer 2

This is probably not a good time to buy a house simply to make a profit.
Keep in mind that house prices will probably not gain very much in value due to how rapidly they increased in the last few years. There's a chance they could actually go down some in value simply because they went up so much, so quickly.
There are also significant costs in buying real estate, both to obtain a mortgage or to pay a realtor to sell the property for you and you have to make enough profit to cover both of those costs. Keep in mind that during the time you own the home you'll be responsible for property taxes and interest on the mortgage.
After weighing all the variables some people can still make a profit in this industry if they find something ridiculously underpriced, or if they're willing to hold onto the property long enough for it to grow enough in value to cover all the expenses that go with buying and selling real estate.
But that's definitely not everyone that makes a profit in real estate.

Answer 3

Yes in fact it usually is, just not now, but I digress. Housing has been appreciating at double digit rates, (an artificial bubble) mainly caused by speculation, energy, and gas costs have doubled, property tax especially school taxes have doubled, yet income has only risen an average of 3.9% per year. The foreclosure rate is climbing because people cannot afford these prices, these inflated prices anymore. People used their homes as an ATM squeezing every dollar they could and now find that the homes are not worth what they have taken out of them. As with the dot com correction, the housing correction is long over due. With the next big round of ARM interest rate adjustments coming due in the next 4-6 months I see the foreclosure rate rising, and moving into the Alt-A and prime mortgage area, and think that within a year the prices will drop at least 8-10%. Once the correction has bottomed out then we will see prices rise again.

Answer 4

Always remember that a home is an asset, just not necessarily an asset for you.

When you take a loan out from the bank, you're making money FOR THE BANK. You and your home are assets for the bank.

Now, appreciation can make you money and on a whole there are long periods of time where home values will be on the rise. 15 years ago you could buy a home in LA for $250k, now you're lucky if you could buy one for $800k.

However, you must pay your mortgage every month. You might lose your job, but you'll still have your mortgage payment. Your pay could go up. Your pay could go down. But you'll always have your mortgage payment.

A financial Liability is something that takes money out of your pocket every month. And a home fits that definition. It's just not as bad a Liability as renting an apartment where you get no appreciation and no money down on a principal.

A home that you own a rent out could be an asset though...

Answer 5

Absolutely NOT always a good investment and yes a bad idea for some people.

The house is an investment so you should wight the pros and cons of the expenditure just like any other investment.

Answer 6

If you can afford it, a house is a very safe investment that will almost always beat out inflation as long as you take care of it.

Answer 7

Investing in real estate can be a good thing. There could be tax benefits for some.