Interest rates sure do get a lot of attention, but they shouldn’t be the only part of your home buying decision process. After all, the answer to the question "is right now a good time to buy a house" boils down to whether the time is right for you. Interest rates don’t negate the benefits of buying a home. Unlike that other big-ticket purchase — a car — home value doesn’t decrease once you get the keys.
Let’s dig into the advantages of buying a house.
When it comes to long-term, stable financial growth, real estate is your ace in the hole. If you bought a home 30 years ago for the average median price at the time — about $105,900 — that same home would have appreciated by almost $280,000 in 2022 to about $384,900, according to the National Association of REALTORS®. Even factoring in the lowest point for the market in recent memory, home values have risen over time, and have kept pace with inflation.
Rent money just goes. The down payment and the principle in your monthly mortgage payment goes straight to your equity. That equity, an interest percentage in the home, gives you a lot of flexibility. You can:
Thanks to equity, the typical net worth of homeowners is $300,000 compared with $8,000 for renters, according to 2022 NAR data. That’s a lot of financial leverage.
Believe it or not, savings and taxes can play together nicely. Equity is savings, and when you sell a primary residence, you don’t typically pay taxes on the gain. You can take up to $250,000 ($500,000 for a married couple) without owing taxes. So all that appreciation goes with you on your next adventure.
If you itemize, you also can deduct some of your property costs from your federal taxes. Those include the annual interest you pay on your mortgage, your state and local property taxes up to $10,000, and in the year you buy, some of the fees you paid to close on the home. Only itemize if it means you can claim more than the standard deduction, which for tax year 2022 is $12,950 for single filers and $25,900 for married couples.
More Benefits of Buying Home
Unlike rent, your fixed-rate mortgage payments don’t rise over the years, so your relative housing costs may actually go down the longer you own the home. That is, if your earnings go up, a static mortgage payment means your home debt load becomes a smaller percentage of your monthly budget.
Here’s an example: Say your mortgage payment is $2,329 this year and your monthly gross salary is $6,667 (roughly $80,000 per year). That means you’re putting 35% of your salary toward the mortgage. Now, fast forward a few years. Say you saw 5% salary growth annually, and you’re at $7,700 gross per month. Your mortgage payment is still $2,320, but now you’re only spending 30% of your salary on your mortgage.
Of course, keep in mind property taxes and insurance costs will likely go up.
Speaking of those mortgage payments: Each one, paid on time, is helping to further build your credit score.
A big pro of owning a home is that you can turn the house you can afford into your dream home – bit by bit. Those holes in the wall and paint colors your landlord freaked out about? No worries. You can upgrade amenities, décor, and style to your vision.
Please consider The Myers Team your resource for all things real estate. We have over 35 years of real estate experience, specializing in (but not limited to) the Montgomery County area. If you are refinancing, want a recommendation, need a service provider or just have a home related question, please give me a call at 301-910-9910 or email me at email@example.com.