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Financial Literacy

Financial Literacy

Home Financial Literacy Mortgages Why People Buy Homes (vs. just renting or living under the freeway overpass)

Why People Buy Homes (vs. just renting or living under the freeway overpass)

People buy homes because it beats the snot out of renting. Ever try to paint a wall in an apartment? You have to fill out a lot of forms and agree to repaint it when you move (and then you actually have to repaint it when you move, or forfeit your security deposit). When you own your own home, you are the landlord and the Committee.

But there are other reasons you want to own a home. Mainly, it is a smart financial move, or at least it was until 2008. For half a century, home prices went up as regularly as an opera singer’s waistline. As a nation, we got fat on real estate wealth. And then one day the music stopped. Everyone scrambled for a seat. Everyone realized that the musical chairs games of real estate didn’t work – there weren’t nearly enough chairs for everyone. Prices plummeted. The Financial Crisis of 2008 was born.

There is an even greater reason to own a home, or at least there was: The cheap cost of money makes for very high rates of return with leveraged investment returns.

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