A fab piece in the Boston Globe yesterday on why owning a home may not be all it’s cracked up to be. 
For generations we’ve been taught that home ownership is a guaranteed ticket to wealth, prosperity and stability.  Heck, it’s why I bought a place in Manhattan five years ago.  But that sentiment is reportedly changing. ”It is now glaringly clear that buying a home is a financial risk, not the surefire investment it is often perceived to be,” writes the Globe’s Rebecca Tuhus-Dubrow. “Widespread homeownership may also have a negative impact on the economy, because, among other reasons, displaced workers can’t easily relocate to new jobs.”

That may be true…But part of me is still rooting for home ownership. One very big reason why our real estate market fell to pieces is because banks handed us these ridunculous mortgages with no questions asked and we, in turn, became over-leveraged and under-prepared for home prices to slide.  Home ownership, when practiced properly (i.e. paying at least 15% down, planning to live in the home for longer than five years, signing off on affordable fixed-rate mortgage, having a savings and no credit card debt) is not a menace to society.  Rather, putting zero money down on a $500,000 home, while earning, say, $50,000 a year is the trouble.  My take is that it’s the irresponsibility with which we entered the housing market over the past several years that is now slapping home ownership in the face.

My advice to first-time buyers: There are many opportunities to get in now: the $8,000 tax credit, fallen home prices, low interest rates and a unique bargaining power. Realtors tell me first-time homeowners play the most critical role in the real estate circle of life.  The buying cycle, after all, starts with first-time buyers.  If “starter” homes go neglected then existing homeowners will have a tougher time becoming second-time buyers and so on. That said, it’s also become more challenging to purchase a home – but I think it’s for the better. Plan on putting at least 15% down. If the bank will let you get away with less, don’t listen to ‘em. Next, make sure you are comfortable living in the area for at least the next 3,4,5 years. And if you don’t think your job is stable, don’t bother buying right now. If you lose your income tomorrow, will you still be able to afford your mortgage? The Boston Globe article is right about how renting offers more flexibility in some cases. Finally, don’t assume every property’s a steal right now.  Alexis McGee at Foreclosures.com tells me that if you’re scoping the foreclosure market for bargains don’t even bother with these houses unless they’re at least 30-40% off their peak prices.