With school loans diminishing and job salaries rising, there is constant pressure among family and friends to start looking for a home and stop renting.
"It's a great investment", they say, "and it sure beats throwing money away on rent and you'll make plenty of money when you sell."
While that indeed makes sense, what I fail to understand is how one actually makes money?
Let's say I had bought my first home in the later quarter of 2011 when the average price of homes in my area was $201K USD. In a little over six years, the average has gone up ~95% and sitting at about $391K USD. The national average has seen a rise in the same period of 44% ($151K USD to $217K USD).
While one may point out that my 95% gains compared to the nation 44% is proof that there is money to be made, there are two things that seem evident:
- One has to move to a neighborhood, be it another county or likely another state (in my case) in order to see any real net gains.
- The average home owner who sees their house raise 44% in value will really have to downgrade the area they live in, or house that they're use to, in order to see any real marginal gains.
If the market is doing well for you, it's likely doing well for everyone in your area too, no? So what's the point of selling a house that went up 44% in order to buy a house that also is valued 44% higher? Or hell, 95%! All I can think of is that the significance is behind the fact that it's all about your net worth. But it seems like the idea of using a single home as an investment strategy doesn't see too much money actually going into one's pocket.
[Data gathered from Zillow.]
[It's easy to see how property investors make money so this question is strictly for owners of one home.]