Estimated reading time: 3 minutes, 19 seconds
After a decade of lost wealth, where will you go from here?
In the popular Back to the Future movies, Marty McFly goes back in time, accidentally gets his mother to fall in love with him, and has to work with his future friend, Dr. Emmett Brown, to make things aright. If he doesn't fix things-and learn from his mistakes-a different future will emerge where his parents don't marry, and he never exists.
The whole movie, Marty does everything he can to get back to the future.
For the last decade, many homeowners have been waiting to get back to the future as well…the future where their home prices are the same as they were ten years ago. It's been a long wait.
But it's finally come. As "The Wall Street Journal" reports, "The average home price for September was 0.1% above the July 2006 peak, according to the S&P CoreLogic Case-Shiller U.S. National Home Price index released Tuesday."
Of course, in the fine print is the fact that while prices are the same, value isn't, "Adjusted for inflation, the index still is about 16% below the 2006 high. Home prices jumped 5.5% over the past year."
Speaking of going into the past, in 2010, "The New York Times" wrote about how people-in the midst of the housing crisis-still believed that real estate would go up 10 percent a year. That of course hasn't happened. Back "The Wall Street Journal Article": "Home prices have grown at an inflation-adjusted annual rate of 5.9% since 2012, while incomes have grown by just 1.3%, according to Case-Shiller. By contrast, from 1975 until the present, prices grew at a rate of 1.1% a year, while per-capita incomes grew 1.9%."
The WSJ article goes on to point out that the "recovery" in housing isn't all roses. "The country is building far fewer homes than normal, the homeownership rate is near a five-decade low, and mortgages remain difficult to come by, especially for less-affluent buyers. Rising mortgage rates could also begin to pose headwinds to further price growth."
But, more than likely, people will read a headline that says, "Home Prices Recover Ground Lost During Bust," and start thinking things will be as they were before. Unfortunately, this future of housing will most likely much different than the decade that led up to the bust. But what remains the same is that people will continue to think that buying a house is an investment-that it is an asset-when it is not.
So since we are back to the future of housing, it's a good time to remind folks of the reality that your house is not an asset, and if you heed the word, maybe we can avoid another housing bubble…maybe.
Your house is a liability
Since the lesson still hasn't sunk in for many Americans, I'll repeat here: Your house is not an asset. It's a liability.
Very simply, an asset is something that puts money in your pocket. A liability is something that takes money out of your pocket. The reason people are confused and.....
Many people gawk at this but I agree. I must add though (imho) Unless you're generating revenue from renting rooms out.. or you're staying there temporarily ( and inceasing its value only to sell for a profit) your house is costing money... not making money. There is an opportunity cost for the money you have tied up in a home.. sometimes 30 years. Could you get a bigger return in a shorter amount of time elsewhere? Are you going to use it to finance a business? Investing in a primary residence needs to be calculated very carefully. It doesn't always make sense to buy... Many people foolishly omit imp components when deciding to rent or purchase a home. For me, I'd have beds stacked to the ceiling. The goal is to have enough money to pay cash and be done with it... It's often said if you can't afford to pay cash you can't afford it.