Why Should I Buy a Home?

Owning a home of one's own is part of the typical American Dream – which often includes a spouse, two children (one boy and one girl), a dog and cat and a white picket fence.

Home ownership for the average person became a reality in 1947 when the first planned community – Levittown – was built on Long Island, New York by Levitt and Sons after the Second World War. William Levitt learned his home building skills as a Sea Bee in the United States Navy in World War II and built his homes on farms purchased from local farmers in the area. The construction of these homes was modeled on the assembly line concept of car construction as originated by Henry Ford.

Levitt's construction crew went from lot to lot and performed the same task on each one with supplies dropped off by trucks on the site. As a result, the community consisted of four different house models with very little variation among the models. In 1948, Levitt boasted that “at peak capacity, his firm could complete one house every fifteen minutes.”

Whether or not this is true will never be known. However, what we do know is that GIs returning from military duty were easily able to afford a home in Levittown and thus, purchase their share of the American Dream.

Houses in Levittown sold for approximately $8,000 at that time and while home prices have risen exponentially since that time, the American Dream lives on and people will do whatever they can to purchase their rose-covered cottage, whether it be in the form of a detached house, town home or unit in a high rise condominium.

Home ownership has many benefits. Many American home owners would be financially insecure at retirement if it was not for the equity in their home. Real estate values have increased steadily over the past sixty years. As a result, each month when you make a mortgage payment, the balance that you owe on your home decreases. In addition, since home values typically increase in price, it is worth a bit more each month as well. Worth more – owe less is equity build-up.

Assuming you purchase a home for $200,000 and make a down payment of $20,000. In five years, you decide to sell your home and discover, to your delight, that your home is now worth $250,000. If you sell the house for $250,000, the Buyer pays that sum to the bank in the form of a new mortgage. Your mortgage is now paid off and you have made a profit of $50,000 (home appreciation). Even if you have not saved any money in the bank or purchased any stock, you have still made a painless real estate profit of at least $50,000 in five years which is most likely more than you would have earned in any other financial transaction.

Owning a home provides a number of tax advantages. The interest you pay on your mortgage is tax deductible. In addition, you can deduct the total amount of your property tax bill from your income tax. Certain home improvements can also be claimed as income tax deductions. Be sure to check with your tax advisor as he or she will know exactly what repairs and/or upgrades are deductible.