The push for home ownership in the U.S. is an obsession. More than the need to own a house and having more privacy and comfort, Americans are preoccupied with the idea of buying a house for wealth accumulation.
This intense desire is a direct outcome of false advertising. Both the housing and mortgage industries have teamed up with our government to convince Americans that the way to financial prosperity is through home ownership.
The well-orchestrated strategy has worked. Today, Americans will do just about anything to buy a house. Once they purchase the property, five to ten years later, they hope to sell it and make a profit.
The housing business, itself, has always done well financially. The multi-trillion dollar revenue generating industry accounts for more 1/3 of the United States Gross Domestic Product (GDP). In recent years, total revenue has increased to more than $4 trillion. Unfortunately, most of that money came from people who sacrificed to purchase homes they can't afford.
The commitment to home ownership is no small undertaking. Beyond the pledge to repair and maintain everything that?s broken on the property, the real test comes down to money. Because of the high cost of homes, many withdraw or borrow funds from their retirement accounts just for a down payment. Everyone commits to huge mortgages that extend between 15 to 30 years into the future.
Once the home is purchased, millions struggle with mortgage payments and additional costs to maintain the property. Regrettably, cash-poor home owners have no choice except to borrow additional funds, mostly on credit cards, for home expenses. They do it all for the investment value. They believe when the property is sold the money will come back tenfold.
Contrary to popular beliefs, a home is the worst type of financial investment one can possibly consider. Past the highs and lows of real estate values, most home owners get no more than a zero percent return in a good housing market. Many lose thousands of dollars, unknowingly.
A home owner who pockets $200,000 after selling the house, for example, might be delighted to receive such a large sum of money. What the seller may not take into account is the amount of money that was spent on the property during the years of occupancy. When mortgage interest, taxes, and maintenance costs are subtracted, the apparent profit dwindles to zero percent return on investment. The one who really profited is the lender, a well kept secret in the montage and housing industries.
There is another disappointing aspect to this scenario. All taxes, home owners' insurance payments, and maintenance costs could have been saved in a different investment program for a larger return?real money.
Today's homes are beautiful. They are built for comfort and convenience. But despite their attractive designs, nicely decorated interiors, and beautiful landscapes, they are commodities. Home builders, sellers, and mortgage lenders are expecting to sell the properties for profit.
Home owners have the same expectation. During their stay in the house, they hope the property will appreciate in value. When they get ready to sell, they anticipate making a big profit from someone who will pay the asking price. Unfortunately, the deal doesn't work in their favor. Lenders generally end up winning, leaving home owners with a raw deal in the end. Sadly, many people are not aware of the problem.
Those who desire to accumulate wealth should NOT invest in a home. They should consider renting, instead. Renters can be just as private and comfortable as home owners. More importantly, if they plan well, they can beat the financial outcome of the majority of home owners in this country.
To rethink the way we view home ownership vs. renting and win, we need more education.
Best regards,
Tom Graneau, Sr.
Tom Graneau, Sr., a personal financial management coach and author of a new book: Renters Win, Home Owners Lose: Revealing the Biggest Scam in America, and Are You Financially Checkmate? If you desire to be private, comfortable, and rich, Discover how to beat the mortgage and housing industries' scam that keeps millions broke. Avoid the trap and win. The Uncommon Language of Money http://www.uclmoney.com
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