Five Reasons to Buy a House in 2022
Published August 12, 2022
Is it better to rent or buy a house? At some point, this question comes up in most people’s lives. It’s normal to have reservations about buying a home – this is potentially the largest purchase in your lifetime.
Home buying is where we come in! The more you know about the best reasons to buy a home, the less scary the process will be. Here are the top five reasons why you should consider buying a home:
1. Pride of Ownership
One of the non-financial aspects of owning is pride of ownership. Owning means you can paint the walls any color you want, turn your music up, stomp around on the floor (and you won’t hear upstairs neighbors either), attach permanent fixtures, and decorate your home according to your taste.
Homeownership can also give you a sense of stability and security. It is investing in your future — equity that will grow with you the longer you stay in the home.
2. Appreciation
While real estate generally moves in cycles, housing values have consistently appreciated. In fact, the median sales price of an existing single-family home in the United States reached $391,200 in April 2022 — the highest price on record. The sales price has risen year-on-year since 2011, increasing by more than $100,000 between 2018 and 2021. (Statista)
Waiting to buy a home sometime in the future will most likely cost you money. If a borrower hesitated to buy a $300,000 home in 2020, they would pay about 38 percent more for that same house today. At these numbers it’s nearly impossible to save money faster than homes are appreciating in value. Many homeowners view their home investment as a hedge against inflation.
3. Predictable Pricing
When it feels like everything around you is changing, owning a home with a fixed rate and payment is one less thing to worry about. Unlike rent, fixed-rate mortgage payments don’t rise over the years. It’s worth noting that if you have your property taxes and insurance included in your payment; it may adjust depending on your taxes and insurance only.
Meanwhile, the cost of renting continues to grow. The average rent for a three-bedroom place in Marion County, Oregon, was almost $1,600 per month last year and ranks Oregon in the top 15 most expensive states in which to rent. It will only get worse as we see rents rise an average of almost 10 percent per year.
4. Preferential Tax Treatment
Tax rates favor homeowners. A few ways this could help you at tax time include:
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In general, you can deduct state and local real estate taxes.
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If your mortgage balance is smaller than the price of your home, mortgage interest is fully deductible on your tax return.
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If you receive more profit than the allowable exclusion upon sale of your home, that profit will be considered capital gains, if you own your home for more than one year. Capital gains receive preferential tax treatment compared to income tax, which means that the taxable portion could be less than expected.
5. Equity
Money paid for rent is money that you’ll never see again. However, mortgage payments help you build equity in your home. Building this equity in your home is a ready-made savings plan that you can tap into when you need it.
And if you don’t know how equity grows, let’s break it down. Part of a homeowner’s monthly payment is applied to the loan's principal balance, which reduces obligation. The way amortization (paying off a debt over time in equal installments) works, more of the payment goes toward the principal and less toward interest each month. In other words, the payment amount applied to the principal is the lowest on the first payment and the highest on the last payment. The longer a homeowner is in the home, the more equity they build with each payment.
The Bottom Line
While there are many benefits to home ownership, it also carries many responsibilities. It's wise to make sure you're mentally and financially ready before buying your first home. Our mortgage department would be happy to help you through this process – including how much you can afford and if it’s the right time for you. Contact one our mortgage specialists today!
This post was written by our mortgage department, not tax professionals. For up-to-date information on tax implications, see your tax specialist.