Courtesy of Douglas Boneparth
When it comes to buying a home, think of it as a place to live, not an investment.
A home is simply “a roof over your head” and a place to create memories, said Douglas Boneparth, certified financial planner and co-author of “The Millennial Money Fix,” in an interview with CNBC’s Frank Holland. during CNBC Make It: Your Money virtual event on October 17.
Even though homes typically sell for hundreds of thousands of dollars, Boneparth advises buyers not to think of them in the same way they might think of a 401(k) or stock index fund.
It is rather a “home base” which ensures stability, particularly for young families. A home can also have sentimental value, but otherwise it’s “very difficult to calculate the return on investment,” he said.
“If you sell the house several years later and make fantastic money,” Boneparth said. However, it’s very difficult to track “every little repair and addition you’ve made to this house” over “20 or even 30 years” of ownership.
Boneparth makes an exception for rental properties because they can generate income for their owners.
It’s also worth noting that for many people, owning a home has become exorbitant.
“Buying a home has never been more difficult for the average American,” Boneparth said. “And it doesn’t look like that’s really going to change anytime soon.”
Homes are now selling for a median price of $416,100, according to the most recent data from the U.S. Census Bureau. And given that the median down payment for a home in the United States is more than $25,000, the upfront costs of homeownership are too high for many buyers.
In addition to the down payment, there are also a number of ongoing costs specific to homeownership, including mortgage payments and interest, property taxes, utilities, homeowners’ association fees, and repairs in progress.
All of these expenses can make homeownership out of the question. “You really have to be a very diligent saver” to “make that down payment and live comfortably in that house every month,” Boneparth said.
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