During these hot days of summer, swimming or relaxing at the pool is a delightfully fun treat.  But have you been to a water park??  Your fun is certain to be amplified --- with water slides, wave pools, hot tubs, a lazy river, and more.  If you spent a month visiting the Water Park each day, and then had to return to a plain old public pool, it would certainly be somewhat disappointing.



How does this all relate to real estate?  We spent five years at the water park, and for the past two years we’ve been back at our regular, plain old swimming pool.  Some people are having a hard time being excited about it.

After a few years of double-digit per-year appreciation many people began to consider that the norm.  And if such an appreciation rate were to continue indefinitely, everyone that could possibly buy real estate should buy real estate.  Creative financing programs kept up with the excitement of hopeful homeowners by enabling more and more people to buy homes during the real estate craze of 2003-2007.

But now, in 2008, we find ourselves without double digit increases in the value of our home each year.  According to the City of Harrisonburg, values of homes under $300,000 increased by 3- 6% between 2007 and 2008.  In conversations with homeowners, most seem to feel that their home value is staying steady, some feel like it may be declining, and some feel confident that it is increasing.  Regardless, within the recently past context of a 10%-20% gain per year, it’s just not as exciting to buy or own real estate right now. 

But wait --- perhaps we are forgetting something!  Certainly, the public swimming pool seems mundane after 30 days straight at a water park, but would that contrast really cause us to stop going to the public swimming pool altogether?  To have such a disinterested attitude would be ignoring the fact that it is still a hot summer, and the public pool can be a refreshing and relaxing place to spend our time.  Likewise, we shouldn’t forget all of the benefits of owning real estate, even when we’re not seeing 10+ percent appreciation.

BUILDING LONG TERM WEALTH – Owning your home is, arguably, the best way to passively create long term wealth.  For almost everyone, a portion of your monthly budget will be used to provide you with shelter.  If you own your home, this unavoidable monthly housing expense will be paying down the principal balance of your mortgage, and will allow you to reap the benefits of appreciation over the long term.

SHORT-TERM TAX SAVINGS – Even without waiting for the eventual payout when you sell your home, by owning a home you will save money on your taxes each year by deducting the interest you pay on your mortgage.

STABILITY – Unless you enjoy the moving process, owning your own home also provides you with a sense of stability.  You won’t need to find another rental property if the owner decides to sell.  You can also make improvements to your home that will benefit you (instead of your landlord) over the long term.

Swimming (or going to the pool) isn’t for everyone – some people don’t know how to swim, are afraid of the water, or burn easily in the sun.  Likewise, everyone shouldn’t run out and buy a home – some people are transient based on their career, or are still building up a down payment.  But as you consider whether buying a home might be right for you --- don’t get discouraged by the fact that you may not see 18% appreciation in your first year of owning the home --- focus on the long term benefits of home ownership that have persisted through the decades.