May 18, 2020

Why Homeownership Can Be Worth It (Even During a Pandemic)

Like most of us, I woke up on January 1, 2020 hopeful of the year to come. The year started with unemployment rates at 50-year lows, the stock market entered it's 11th year as a bull market, and the year seemed hopeful for a strong year of economic growth. In two short months, our nation has gone from a booming economy to a near-standstill thanks to Covid-19. I've asked people young and old if they remember anything like this, and no one can. The closest is a natural disaster or world war; but even under those circumstances, it generally impacts set geographical locations, not the entire world.

Under our current conditions, the housing market continues to operate in a limited fashion during what is typically the busiest part of the year. Despite the pandemic, for some families homeownership can be a great purchase and provide long-term financial stability, where it makes financial sense to do so. The benefits of homeownership can be highlighted even more during our current crisis. Today I review a few reasons why owning your own home is worth it, even during a pandemic.

  • Stable Payment: The majority of mortgages today are fixed-rate, amortized loans. With a fixed rate loan comes a consistent payment throughout the course of the loan; while taxes and insurance will likely change, the principal and interest payment will not for a fixed rate loan. Rent increases can range from 1-3% per year, and even more in highly desirable neighborhoods. While this number may not sound large, compounded over the course of several years these increases can add up. Owning your own home with a fixed rate loan provides a stable monthly payment. As I've mentioned in a prior blog post, making good choices will hopefully allow you to own your home free and clear in time.
  • Equity Growth: The median home price increase in 2019 was 6.2% nationally year-over-year ; in some markets and desirable areas, the growth was even more. Compared to renting, owning your home can result in significant equity growth for simply living in your home. Over time, the growth of equity can be significant and contribute heavily toward a household's wealth. Compared to renting, owning a home can provide not only a place to live, but an investment in time.
  • Greater Control: This topic isn't a financial one, but a personal. Owning your home allows you to make the changes you'd like to make within local codes and HOA or neighborhood restrictions. This allows for greater personal control over your living space, which can help with mental health. Even something as simple as paint color can make a big impact to a space . As an added benefit, with a nation on lockdown allows homeowners to finally get to those long-awaited projects.

I believe strongly in the benefits of home ownership when it makes financial sense for a family. The long term benefits can be simply remarkable in contributing to overall household wealth, especially over time.