We all want to be wise investors, but our brains get in the way. Behavioral scientists tell us we are hard-wired to assume the future will be like the past. These tendencies can cause us to miss bargains in real estate. Here are five reasons why buying a house now is a good investment:
1. It’s becoming more expensive to rent than to own. Yes, renting is convenient, but living in a rental also comes with restrictions on what renters can do with their living space—a simple task like painting requires permission from the property owners. Low interest rates and reasonable home prices make owning look more favorable than renting, especially when rent costs are rising!
2. The population of the United States is still growing. We are the only major industrialized nation that isn’t suffering negative population growth. All those households have to go somewhere, and many families are already doubled up.
3. Building has been almost nonexistent for several years. Ultimately, it comes down to supply and demand. There are still lots of foreclosures to work through, but the absolute supply of houses is declining.
4. Investors are removing inventory. As investors generate positive cash flow by buying bargain properties, more become landlords, reducing the available supply.
5. Homes can’t be replaced for their current prices. When building finally starts, builders will be forced to charge more than existing homes fetch. The cost of lumber, copper, and petroleum-based products has risen, taking building costs with them. That will make existing homes a bargain.
In the history of this country, there has never been a down economy that hasn’t recovered. This one will too, and those who take advantage of record-low interest rates will do well.
Unfortunately, people don’t want to buy at a good time; they want to buy at the best time. Few realize it’s impossible to pinpoint that time until it’s past.
It’s certainly a better time to buy than before the real estate bubble. No one can say exactly how things will come out, but those who can afford to hold their property at least five years should do extremely well.