Saturday, March 26, 2005

Owning a home is still a sound investment

By Texas A&M, David S. Jones

A new survey from the Homeownership Alliance says a majority of Americans believe that owning their own homes leads to personal financial security, improved school performance for their children and greater community involvement on the resident’s part.

“Despite two years of media scare stories about an imminent home price collapse, the majority of Americans we interviewed view homeownership as a superior financial investment as well as a fundamental building block to a better life . . . ,” said Thom Riehle, president of Ipsos Public Affairs , which conducted the poll of 1,000 homeowners.

The June 2004 poll found that:

* Sixty-six percent of those surveyed believe that children who grow up in homes that their families own are more likely to do better in school.
* Eighty percent think that owning a home gives them a stronger connection to the community in which they live.
* Eighty-seven percent believe that homeowners are more likely to be involved in community organizations and local government.
* Seventy-six percent agree that people who own their own homes are more likely to take time to vote in national elections.
* Sixty-nine percent think the federal government should provide incentives to make housing more affordable.
* Eighty-five percent believe a home is a more secure investment than the current stock market.

“When you consider that your house also provides you a place to live, any gain in value over the inflation rate is pure profit,” says Real Estate Center Research Economist Dr. Jack C. Harris. “However, this feature — personal use of the property — both helps to make the investment more secure (assuming you can comfortably afford the payments) and less profitable.

“In other words, you can’t always maximize your return because you may not be in a position to sell when values are highest — even if you know that to be the case. Or you may have to sell when values are low, say when you move to take a new job.”

Harris says because you are getting service from your home, you can ride out down cycles in the markets and wait until demand returns. You can also lock in the debt service (stabilize your monthly payments) with a fixed-rate loan to protect against interest rate risk.

“On the other hand, you can’t always sell when the time is right investment-wise,” notes Harris. “If values are up, and you are moving to another area, you can reap the rewards.

“But if you are staying in the area, there is little point in selling and then buying another home. Often, you find yourself having to sell in a bad market when you relocate.”

Homeownership Alliance President Rick Davis says recent findings support academic studies released in the last two years that show homeownership is correlated to numerous positive outcomes, including higher household stability and more social involvement. Homeowners also are more prone to political participation and activism and are more environmentally aware.

Previous Alliance surveys have given homeownership credit for “better child outcomes,” improved health, lower crime rates and “stronger community characteristics.”

While it may not be proven scientifically that homeownership is the solution for many of our problems, it is obvious from these surveys that most Americans believe that to be the case.

The Homeownership Alliance is a coalition of 15 organizations based in Washington, DC, and committed to ensuring support for the American housing system. The Real Estate Center at Texas A&M University is the nation’s largest publicly-funded organization devoted to real estate research.


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