The 3 Worst Reasons to Buy a House

Here are Money Central's three worst reasons to buy a house:

1. Better than the stock market.

Nationally, home prices are up more than 50% in the past five years, and in 30 cities -- including San Diego, Los Angeles, Miami and Washington, D.C. -- prices have doubled. In the same period, the value of an investment in the Standard & Poor's 500 stock index has shrunk about 2%. Remember, though: past performance is no guarantee of future results.

2. I’m tired of throwing away money on rent.

Normally, renting is cheaper than owning. But in some cities, soaring real estate prices have made renting so much cheaper that it's getting really tough to make the case for becoming a homeowner.

You’re not really throwing money away when you send a check to your landlord, anyway. You’re exchanging it for a place to live. You’re also getting flexibility and freedom -- things you sacrifice when you buy a home.

3. I need the tax deduction.

The notion that you should buy a house just for the deduction has always been faulty, but just got more suspect with the latest proposals to cap the mortgage interest write off. If these proposals succeed in becoming law, the tax benefits of mortgages in expensive cities could decline dramatically.

Remember that many of the real costs of owning a home aren’t deductible.

In general, I favor buying over renting, but she's right -- there are good and bad reasons for buying a house -- and homeownership is not all a bowl full of cherries. You need to be realistic as to what it will and won't do, be, and cost you.

Here are some posts that give additional perspective on this topic:

• Don't Bite off too Much House
• The Hidden Costs of Homeownership
• 43% of First-Time Home Buyers Put No Money Down

FMF recommends Emigrant Direct.

Comments

[Amanda]

For certain, home ownership should always be a goal. However, I think it's important to note, especially for for people just starting out, that buying a house when you're not ready or, as you mention, for the wrong reasons can be financially deadly! Especially now that these days, people can get a mortgage to cover the entire house, and not put a down payment... which is not wise at all.

[Rob]

Look out for that AMT - I did calculations on how much house I could get for the rent I was paying (I had the downpayment) and factored in tax savings which turned into a mistake. Here in NY, it doesn't take much to hit the AMT. Unable to "write-off" a penny.

[kevin conroy]

that is a great point

[delores leon]

my husband and myself is buying a house but we have not found anything that both of us like,and it is becoming a real struggle.so he has made a decision without me in buying a house that i really do not like,for eg.the location ,area and its not a presentable for our children.what can i do as a wife and mother.

[delores leon]

i really do need an advise from someone who is a christian because i am doing everything through JESUS CHRIST.