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Why Do People Actually Buy a Home?

It seems that every time we talk about real estate today the conversation immediately goes to the financial aspects of buying a home. Where are prices headed? Where are interest rates headed? Should I wait to try and get a ‘better buy’? Should I wait until I can get a ‘steal’?

The odd thing about all these questions is that survey after survey keeps telling us that price is not the reason families actually buy a home. When money is considered at all, it is in light of not paying rent to a landlord. Let’s look at two recent surveys as examples:

National Housing Survey

The top five reasons given in the survey for buying a home, in order, are:

  • It means having a good place to raise children and provide them with a good education
  • You have a physical structure where you and your family feel safe
  • It allows you to have more space for your family
  • It gives you control of what you do with your living space (renovations and updates)
  • Paying rent is not a good investment

The Myers Research and Strategic Services Survey

The top five reasons given in the survey for buying a home, in order, are:

  • Home ownership provides a stable and safe environment for children and other family members
  • Home ownership means the money you spend on housing goes towards building equity, rather than to a landlord
  • Home ownership creates the opportunity to pay off a mortgage and own your home by the time you retire
  • Home ownership creates the opportunity to live in a neighborhood that you enjoy
  • Home ownership allows you the right to decorate, modify and renovate your home as you see fit

Bottom Line

Price dominates conversation when we talk about buying a home. However, when it comes down to it, we actually buy for the same reasons our parents and grandparents did – we want a better lifestyle for ourselves and our families.


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19 replies
  1. Jody Wise
    Jody Wise says:

    Love your blog. And this post is particularly interesting because it serves as a good reminder of the emotional aspect of homeownership. I would add that ownership saves the hassle and cost of moving from rental to rental. With your own home you get to stay put!

    Reply
  2. Derek
    Derek says:

    Just to play devil’s advocate I had to include this recent article found in the WSJ:

    Buying a home is no way to make money
    Given the cuts looming over Social Security, here’s my advice: Forget the house and save for retirement, said Robert Bridges at The Wall Street Journal.
    posted on July 15, 2011, at 9:29 AM

    Robert Bridges
    The Wall Street Journal

    Homeownership “has never been a particularly stellar investment,” said Robert Bridges, and the sooner young people realize it, the better. Between 1980 and 2010, the median value of a single-family house in California rose from $99,550 to $296,820, or an average of 3.6 percent per year. If the buyer of that median house had opted in 1980 to put the 20 percent down payment of $19,910 in a Dow Jones Industrial Index fund instead, the value of his or her portfolio in 2010 would have been $1.8 million—$1.5 million more than the house. So “why is there such rapt attention to the revival of the homebuilding industry and residential property markets?” Because politicians crave economic recovery, and few activities have such “direct, intense, and immediate positive economic impact as new-home construction.” But that transitory macroeconomic bump doesn’t help young people, who “simply can’t afford” both mortgage payments and contributions to retirement accounts. Houses may be “part of a good life,” but they’re “not always good investments on the road to financial independence.” Given the cuts looming over Social Security, here’s my advice: Forget the house and save for retirement.

    Reply
  3. Sally Roberts
    Sally Roberts says:

    With all due respect to the folks at WSJ….but it is hard to “sleep, cook, entertain, play with the kids and lie in the hammock” in your portfolio….where are all those folks living…or are they renting….with all the money they have made in their portfolio…

    Reply
  4. Derek
    Derek says:

    Thank you for being so diligent in not only providing a response to that article in WSJ, but for providing readers here with that link, via my earlier entry. It’s a great conversation to have! Thank you for this blog as well, it has served me greatly in the past as I’m sure it will in the future!

    Reply
  5. Chris Swanson
    Chris Swanson says:

    So a DJI index fund returned in excess of 25% per year over 30 years? Any financial advisor I’ve ever talked to (or read advice from) has said that about 8% long term is a good return to expect from a balanced portfolio. I don’t know; maybe if you bought Microsoft 30 years ago you’d have that kind of return but hard to believe otherwise.

    Reply
  6. Hannif Highclass
    Hannif Highclass says:

    The bottom line is: Old Age Security. Real estate appreciates – no matter where in the world you live. A fully paid house by many in the developing countries of the world – helps the elder to draw the fund when they are no longer in the work force. Remember not many have the luxury of social benefits that we in the western countries are accustomed to…

    Reply
  7. Mark
    Mark says:

    i am just curious, did anyone actually read the blog. the number one reason by both surveys was living in a good place (safe and stable environment) to raise kids and other family members. The investment aspect wasn’t first in either survey. Further, people looked upon homeownership only in comparison to paying rent. Excellent and informative blog. Thank you

    Reply

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