Most Americans opt for owning a home instead of renting. Statistics quoted by NPR show that out of the approximate 50 million acres of available land in the US, 21 million acres make up our front and backyards. That makes for a lot of homeowners. So, what drives most Americans to invest in buying a house?
1. Owning Property Provides Stability
Our world economy is in turmoil, and many people still remember the market crash in 2008. Owning an inflation-protected physical asset like a house makes it a far safer investment than stocks because it cannot disappear. It is a smart investment and far safer than credit cards. Interest rates may fluctuate, but the appreciation value of your home continues to increase.
Owning a home also provides personal stability. It is a place where your children can grow up. A place on this earth that is exclusively yours. When you rent, you are at the mercy of your landlord and may have to move every couple of years, depending on your lease agreement. So, owning a home gives you more security.
2. Owning a House Can Provide a Passive Income Stream
Owning a home means owning an asset you can use to generate income. One way to generate income from your home is to rent it out and receive rent from others. The other way is to stay in your home and rent out a part of it. You can turn your spare room into a guest room where strangers can spend a few nights with you. All you have to do is enroll in a home rental program.
Millennials seem to be the generation that has grabbed the opportunities owning your home provides. The National Association of Realtors (NAR) reports that as of 2022, millennials represent 43% of homebuyers, the highest share of any generation. Many millennials own more than one property, using houses to generate a full-time income, freeing them to pursue other activities. They are also more likely to work from home.
3. Owning a Home Will Help You Build Generational Wealth
Building generational wealth means you leave an inheritance for your children. A property asset is considered a great wealth builder because its value increases consistently and can be excluded from capital gains tax payable on your estate.
Leaving cash lump sums for beneficiaries can be detrimental to wealth creation. According to Money, 70% of wealthy families lose their wealth by the second generation.
Having a property in your name is also beneficial while you are still alive and allows you to accumulate wealth over time. For one, when your mortgage balance is less than the purchase price of your home, you can deduct the mortgage interest amount from your taxes. The possibility of receiving rent income can supplement your retirement income when you stop working.
4. Home Ownership Offers Access to Home Equity Loans
Owning a home can save you from falling into the credit card trap. If you need to borrow money, getting a home equity loan allows you to borrow at a far lower interest rate than using high-interest credit cards for buying big-ticket items. Banks also give credit easier for property investments than if you are borrowing to secure shares or other investments. If you need cash for unforeseen expenses, you can use your property as collateral to secure a loan. It is a safer way to secure credit and carries a relatively low interest rate.
Buying a home is a great way to invest in yourself because you are far more likely to build a nest egg for your family than lose out on the investment. The resale value of your property steadily increases over time. From a personal point of view, homeowners are more likely to invest in building local communities, developing interpersonal relationships, and creating a stable support system than renters.
