Tuesday, May 22, 2012

Buy a House for the Experience, Not the Potential Gain

All of this adds up to one thing.  Real estate is far more attractive than it was at any point in the last 8 years or so.  Has it bottomed?  That’s the wrong question in my opinion.  Real estate likely won’t crater from here, but also won’t skyrocket.  ”Bottoms” (as in an event bottom) are very unusual after a bubble like we’ve seen.  The standard post-bubble “work out” period is the most likely scenario so prices could be flattish for years.  So do you buy now, rent, invest?  First, I don’t think the average retail investor should bother with investing in real estate.  Real estate investing is a full-time job and requires a great deal of hands on involvement to actually turn a consistent profit above the rate of inflation over any sustained period.  When you buy a house you should think of it as a roof over your head and a place where you will LIVE.  Not an investment.  And this is the key.  If you’re planning on living in a house (as in, 10 years of actually living in a home) then you should have no great fears about buying today.  Does that mean you’ll make money on it?  Or that it will prove more beneficial than renting?  Well, that depends on a lot of personal variables.  But the base case here for national real estate is that the risk/reward of buying a home has changed substantially and is no longer skewed to the bear case. (emphasis mine)
Read it at Pragmatic Capitalism
By Cullen Roche

A few months back I wrote Don't Rush to Buy a Home! This past weekend I was on vacation with several friends and the topic of buying a home came up. As a brief background, we’re all in our late 20’s, have decent savings and are in serious relationships (with a couple of us being engaged). The previous post outlined my views for stagnating to lower prices and mortgage rates over the next couple years. While being aware of this potential outcome is important for potential buyers, the point Cullen makes that I placed in bold is the real message I tried to get across this weekend and think all first-time buyers (probably most buyers) should consider.


  1. Woj,
    I agree. The housing market has changed. Anyone buying a house for enterprising purposes better do their homework. For the general public, housing should be a cost to optimize, not a market to be enterprising.

    I look forward to reading the rest of your blog. I recently started my own at www.qualitatedmoney.com


    1. Peter,

      Thanks for the comment. I'll be sure to check out your blog!