Buying a Home is Long-Term Strategy

 

Buying a home is the smartest thing you can do with your money – in the long term.  In the short term, it might be the dumbest.

 

Such is the paradox that rules in the usual rent-versus-buy debate.

 

“In the long-term, you should always buy,”  says Bob Rennie, Vancouver’s condo king and super real estate salesman.  “ But it depends on your situation.  Buying is a long-term solution to a short-term problem.  It’s like getting married to get a date.”

 

What Rennie is getting at is that, if you hang on to a home for 10 years or so, you’re almost guaranteed to make money, but if you have only a few years, or if you may have to change your mind quickly, you’re almost guaranteed to not make money.

 

Homes are a commodity, just like stocks, metals, money, and other things that are bought and sold.  Some commodities change value quickly, some are slow, but steady movers.

 

Because homes are expensive, it takes years to recover the costs involved in home ownership.  Short-term, you’d be better off putting your money into other areas that move faster.

 

However, one reason why there is so much confusion surrounding the rent-versus-buy debate is that there’s more than just money involved.

 

Home ownership is also an emotional decision, a major commitment of your money and time, and it’s worked very well in the past.

 

But most experts predict that homes won’t increase in value by much in the future.  Markets are stable – meaning there isn’t a bigger demand than supply – so any increase in a home’s value will probably match inflation.

 

The Urban Futures Institute, for example, predicts that this region’s population will increase by a mere 1.7 per cent annually over the next decade, slowing even more after 2010.

 

Under those conditions, home ownership is a form of enforced, low return savings instead of the growth investment it was in the ‘80s and ‘90s.