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This chapter is from the book

The Million-Dollar Question

So, a lot can be said in favor of home ownership. But what about the costs? Houseonomics begins with a very fundamental question—Does it still make sense to own a home? Houseonomics wasn’t written for dreamers who think real estate can make them rich overnight. Houseonomics is for people like you who already own a home or are thinking about buying a home to live in for many years. You do not need to hear get–rich–quick schemes that are literally too good to be true. You want to know if it is still okay to own a home. Our answer is a resounding yes.

We hear two kinds of concerns about buying a home. The first is, “I’ve heard that home prices are too high.” This usually means that home prices are higher than they used to be, which does not necessarily mean they are too high. We are convinced that, in most cities, home prices in the past were actually too low! What we mean is that in most locations and during most time periods, homes were cheap in that people who bought homes made a great investment—often the best investment in their whole life. If your home is a great investment, its price is not too high.

Homes aren’t as cheap as they used to be, but that doesn’t mean that prices are too high. The million–dollar question is whether, at today’s prices, a home is still a good investment. Our answer is that homes are still attractively priced in most of the United States and are likely to give homeowners an impressive rate of return. That does not mean that you should buy a home no matter what the price. You need to be able to identify the firm ground and the quicksand. We will show you how.

The second concern we hear is, “Real estate is not a good investment where I live.” For example, an Indianapolis resident told us that he didn’t think Indianapolis was a good place to buy a home because home prices there only go up 2% to 3% a year. We are going to show you that Indianapolis home prices don’t have to go up at all in order for Indianapolis to be a great place to be a homeowner. And lots of Indianapolis’s exist all over this country—wonderful places to live where home prices don’t have to rise for a home to be a good investment.

Both of these concerns—that home prices are higher than they used to be and that home prices might only go up a few percent a year—tell us that home buyers are looking at the wrong metric: how fast home prices are rising. Houseonomics will explain why you should be looking at something quite different, what we call your home dividend. If you look at your home dividend, you will find that in most of the country a home is still well worth owning—not because home prices are going to increase rapidly but because your home dividend is your engine to prosperity.

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