Much of the blame for the current recession gripping the country and Idaho is being placed on the shoulders of the All American Dream of homeownership. While that conversation is appropriate in light of the cost of the excesses of prior decades, it should not be amplified to the extent that we ignore the true value of homeownership.
Martha Stewart recently wrote: “Home and families are the center of American life. Everything we do to make those homes and the lives in them more meaningful, comfortable and full of life is the American Dream.”
Homeownership matters. It matters because it makes a positive difference in people’s family relationships, their finances and their connectivity to their community. Owning a home is one of the best ways to build long-term wealth. Each mortgage payment reduces the principle owed, slowly building equity. And, except for the last half of the prior decade, one’s home value can expect to increase in value 2 to 3 percent annually.
The federal government recognized the positive effect of homeownership by establishing the Mortgage Interest Deduction. That act allows you to deduct the mortgage interest paid from your gross taxable income. It also allows for a $250,000 ($500,000 for married couples) capital gains exclusion on the sale of a principle residence. What other investment can you make a $500,000 gain and pay no taxes?
Homeownership offers a stable housing cost. By establishing a 15- or 30-year fixed mortgage, you are guaranteeing your housing costs.
Homeowners are often the glue that holds a community together. Homeowners feel more connected and committed to their communities. The long-term stability of being in one place contributes to the safety of a community because one is likely to get to know one’s neighbors well.
At home, people create an environment that’s all their own, helping establish traditions, molding family values and giving them a greater feeling of control over their lives.
While we cannot ignore the price declines of real estate in Ada and Canyon counties over the past three years, the other side of that sword is that when you combine these price reductions with the historically low interest rates, affordability is at an all-time high and has created an ideal situation for qualified buyers.
Whether you’re a first-time buyer anxiously making his or her way, or an existing homeowner looking for a neighborhood closer to work or play, the opportunity to make that move has never been better.
Despite the hit homeownership and the American Dream took in the wake of the economic downturn, homeownership remains good for individuals, and for society.
This column was written by Greg Jensen, an associate broker at Prudential Jensen Real Estate at 219 N. 27th St., Boise. He can be reached at (208) 344-0200.