10 Great Reasons To Buy a Home Today!

10 Reasons To Buy aHome

By Brett Arends , The Wall Street Journal

Enough with the doom and gloom about homeownership.

Sure, maybe there's more pain to come in the housing market. But when Timemagazine starts running covers thatdeclare "Owning a home may no longer make economic sense," it's timeto say: Enough is enough. This is what "capitulation" looks like.Everyone has given up.

After all, at the peak of the bubble five years ago, Time had adifferent take. "Home Sweet Home," declared its cover then, as itcelebrated the boom and asked: "Will your house make you rich?"

But it's not enough just to be contrarian. So here are 10 reasons why it'sgood to buy a home.

1. You can get a good deal. Especially if you playhardball. This is a buyer's market. Most of the other buyers have now vanished,as the tax credits on purchases have just expired. We're four to five yearsinto the biggest housing bust in modern history. And prices have come down along way– about 30% from their peak, according to Standard & Poor's Case-ShillerIndex, which tracks home prices in 20 big cities. Yes, it's mixed. New York is only down20%. Arizonahas halved. Will prices fall further? Sure, they could. You'll never catch thebottom. It doesn't really matter so much in the long haul.

Where is fair value? Fund manager Jeremy Grantham at GMO,who predicted the bust with remarkable accuracy, said two years ago that homeprices needed to fall another 17% to reach fair value in relation to householdincomes. Case-Shiller since then: Down 18%.

2. Mortgages are cheap. You can get a 30-year loan foraround 4.3%. What's not to like? These are the lowest rates on record. Asrecently as two years ago they were about 6.3%. That drop slashes your monthlyrepayment by a fifth. If inflation picks up, you won't see these mortgage ratesagain in your lifetime. And if we get deflation, and rates fall further, youcan refi.

3. You'll save on taxes. You can deduct the mortgageinterest from your income taxes. You can deduct your real estate taxes. Andyou'll get a tax break on capital gains–if any–when you sell. Sure, you'll needto do your math. You'll only get the income tax break if you itemize yourdeductions, and many people may be better off taking the standard deductioninstead. The breaks are more valuable the more you earn, and the bigger yourmortgage. But many people will find that these tax breaks mean owning coststhem less, often a lot less, than renting.

4. It'll be yours. You can have the kitchen and bathroomsyou want. You can move the walls, build an extension–zoning permitted–or painteverything bright orange. Few landlords are so indulgent; for renters, thesetypes of changes are often impossible. You'll feel better about your own placeif you own it than if you rent. Many years ago, when I was working for apolitical campaign in England,I toured a working-class northern town. Mrs. Thatcher had just begun sellingoff public housing to the tenants. "You can tell the ones that have beenbought," said my local guide. "They've painted the front door. It'sthe first thing people do when they buy." It was a small sign that saidsomething big.

5. You'll get a better home. In many parts of the countryit can be really hard to find a good rental. All the best places are sold ascondos. Money talks. Once again, this is a case by case issue: In Miami rightnow there are so many vacant luxury condos that owners will rent them out for afraction of the cost of owning. But few places are so favored. Generallyspeaking, if you want the best home in the best neighborhood, you're better offbuying.

6. It offers some inflation protection. No, it's notperfect. But studies by Professor Karl "Chip" Case (of Case-Shiller),and others, suggest that over the long-term housing has tended to beatinflation by a couple of percentage points a year. That's valuable inflationinsurance, especially if you're young and raising a family and thinking aboutthe next 30 or 40 years. In the recent past, inflation-protected governmentbonds, or TIPS, offered an easier form of inflation insurance. But yields therehave plummeted of late. That also makes homeownership look a little better bycontrast.

7. It's risk capital. No, your home isn't the stock marketand you shouldn't view it as the way to get rich. But if the economy doessurprise us all and start booming, sooner or later real estate prices will headup again, too. One lesson from the last few years is that stocks are incrediblyhard for most normal people to own in large quantities–for practical as well aspsychological reasons. Equity in a home is another way of linking part of yourportfolio to the long-term growth of the economy–if it happens–and stillmanaging to sleep at night.

8. It's forced savings. If you can rent an apartment for$2,000 month instead of buying one for $2,400 a month, renting may make sense.But will you save that $400 for your future? A lot of people won't. Most, Idare say. Once again, you have to do your math, but the part of your mortgagepayment that goes to principal repayment isn't a cost. You're just payingyourself by building equity. As a forced monthly saving, it's a gooddiscipline.

9. There is a lot to choose from. There is a glut of homesin most of the country. The National Association of Realtors puts the currentinventory at around 4 million homes. That's below last year's peak, but wellabove typical levels, and enough for about a year's worth of sales. Morekeeping coming onto the market, too, as the banks slowly unload their inventoryof unsold properties. That means great choice, as well as great prices.

10. Sooner or later, the market will clear. Demand andsupply will meet. The population is forecast to grow by more than 100 millionpeople over the next 40 years. That means maybe 40 million new householdslooking for homes. Meanwhile, this housing glut will work itself out. Many ofthe homes will be bought. But many more will simply be destroyed–eitherdeliberately, or by inaction. This is already happening. Even two years ago,when I toured the housing slump in western Florida, I saw bankrupt condo developmentsthat were fast becoming derelict. And, finally, a lot of the "glut"simply won't matter: It's concentrated in a few areas, like Floridaand Nevada.Unless you live there, the glut won't have any long-term impact on housingsupply in your town. 

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