The Housing Market Misconception

Most people, believe buying a house is a can't miss investment, however people forget to realize that your home is like any assest and is dictated by market forces such as supply and demand.

The Obvious

People who buy homes and use mortgages to finance their purchase do have huge advantages. First the deduction in taxes which lowers a person's adjusted gross income which allows people to pay less taxes. Also they principal they pay toward their mortgages is equity and the rise in value of the home is also equity gain. These are advantages of owning a home instead of renting.

The Not so Obvious

Most people do not understand why the term of standard mortgage is thirty years. Like any loan, a mortgages are the length of the assest lifetime. Mortgages were created to last as long the assest would exist. For example a standard car loan is four to five years or the likely life time of the car. Most people only keep their cars for four to five years and get a new one. Mortgages were designed to last as long as the house is standing. It is pretty obvious these days that houses last longer than thirty years. People also need to realize the value of the land rises not the improvements or house which actually depreciate.

The rise of home prices in the Silicon Valley area is because of the high demand while small increase in supply. The reason for that is because housing has been expanding horizontally because county laws prohibit builders from building structures higher than two floors except in special circumstance. However, if demand gets so high that law might change where construction companies build vertically like major metropolitan cities such San Francisco and New York where demand was high with no more supply of land to expand horizontally so builder build vertically.

Like any assest there is some point the person will sell it if not him or her or the her of the owners of the home. Most people do not realize that a major component of the value of the house is the ability to liquidate the assest. Your house might be worth a ton of money according the appraised value but it worth nothing until you sell. There is possibility that you might not sell the house. What happen if your house so expensive no one can afford your house? What happens if the house is a junk home?

The government encourages people to own a house because they want you to a home owner to be in debt the rest of his or her life. Having debt means that every month a person has to make a payment and most mortgages last thirty years therefore forcing people to work for the lifetime of the loan. If a person stops paying its mortgages the lost the home and the equity of they have built so when you buy a house you have something to lose when you make the plunge to take out a mortgage.

This journal was not created to persuade people not to buy a house because there are advantages of owning a house but people need to realize the disadvantages of buying a home at all costs.