Home As an Investment

By Jonathan Clements

This year, I sold one apartment and bought another. It was a reminder that the words “home” and “investment” don’t belong in the same sentence

Don’t get me wrong: I’m all in favor of home ownership. The tax breaks are impressive. Home ownership forces us to save: With each mortgage payment, we whittle down the loan balance, so eventually we own a valuable asset free and clear. Most important, a home provides us with a place to live.

But what about the price appreciation? According to Freddie Mac , home prices have climbed just 3.7% a year over the past 30 years, not much above the 2.8% inflation rate. To make matters worse, this figure doesn’t reflect the hefty costs of buying, owning and selling a home. What if you include those? Consider one columnist’s sorry tale.

Carrying Costs

This is a topic I’ve tackled before, most notably in a June 2005 Wall Street Journal Sunday article entitled “How Houses Eat Money.” That column, which appeared a year before the real-estate bubble peaked, detailed how I had fared financially with the home I then owned in New Jersey.

read more at: http://www.wsj.com/articles/dont-buy-a-home-as-an-investment-1419728902

Disclaimer: for information and entertainment purpose only

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