Housing article on the benefits of prudent homeownership

We’ve long advocated homeownership as a great way to build wealth. We still believe buying a home of your own is an important early step toward lifelong financial freedom.

Because of recent turmoil in the mortgage markets and on Wall Street in general, one might be tempted to think that it is a mistake to endorse homeownership. We disagree; the only mistake is using shaky real estate investments as a short-term “get rich quick” strategy.

When you buy a family residence that you plan to live in for many years, it should be worth at least what you paid if the time ever comes to sell it. This isn’t true if you buy a home at an inflated price for short-term gain. While we continue to advocate homeownership for responsible consumers, we don’t advise speculating on properties that are overpriced. That kind of investment, like any other, requires a lot of homework and some risk.

If you buy a house at the appropriate price and settle in for the long term, fluctuations in the housing market don’t matter as much. By the time you get to the end of your 15 or 30 year mortgage, the market will not be the same as it is today. And even if the home you purchased isn’t worth any more than you paid for it, you will still have built up equity.

Equity is wealth. It might earn you profit as the house increases in value, it may stay roughly the same, or it may even decrease if the home’s value drops permanently. In any case, wealth that is stored through homeownership is an investment in your future that will make your life easier as the years go by.