home buying / home value

Homeownership Reality

One of my favorite financial writers, Jonathan Clements, writes about “House Rules” in a recent blog post: 
“Real estate discussions almost invariably fall hostage to anecdotal evidence. We all know folks who supposedly made a mint in real estate, as well as people who lost their shirt. But forget the anecdotal evidence, and instead focus on statistics and commonsense. To that end, here are my 13 rules for real estate:
1. Homeownership isn’t as safe as it feels.
2. We shouldn’t buy unless we can see staying put for at least five years.
3. Over the long haul, home prices nationwide should rise roughly in line with per-capita GDP.
4. The land underneath our homes should appreciate, but the dwelling itself will depreciate
5. Any gain in our home’s value will likely be largely or entirely offset by transaction costs, maintenance, property taxes and homeowner’s insurance.
6. The benefits of leverage are often offset by the cost of leverage.
7. The mortgage-interest tax deduction has always been overrated—and, today, that’s truer than ever
8. If you’re a homeowner with a fixed-rate mortgage, what you really want is inflation.
9. While a home’s price appreciation and mortgage-interest tax deduction will likely prove disappointing, homeowners enjoy one huge benefit: They get to live in the place.
10. All homes should be priced to deliver the same expected total return.
11. A paid-off home is the cornerstone of a comfortable retirement.
12. Remodeling is a money loser.
13. A real estate agent’s greatest financial incentive isn’t to get us the best price, but to get us to act quickly.”

Source: Financial Planning for Women