Your humble author Ben Stein was once considering buying a house on the Eastern Shore in Virginia. He decided to run the prospect past his pop, economist Herbert Stein:
"Can you afford it?"
"I think I can buy it without putting myself in the neighborhood of poverty."
"That's good, because that's a neighborhood you never want to be near."
Ben didn't buy the house.
Our home is usually our single most significant asset. Yet the whole subject of housing is nettlesome, especially now that the value of residential real estate has fallen off the map, and is only beginning to claw its way back. Real estate was touted as the "safe" investment after the tech debacle of early 2000 through 2002, but something has gone very, very wrong. Houses became the subject of a speculative bubble and then the bursting of that bubble. First, our stock portfolios were wiped out, and then our houses (yes, even with the new Sub-Zero refrigerators and Viking stoves) were, too. Like everything else, the benefits of houses can be (and were) oversold.
If only we had listened to Ben's dad... .
Do buy your house. While it will turn into an investment over time, you should buy it as a place to live. The reason why housing is desirable as an investment is obscure: It is because when you own your home, in effect you pay the rent to yourself, but you don't have to pay tax on that (implied) rental income. The ...