Buying a Home Is Still a Great Long-Term Bet

Steve's note: A massive housing boom is underway... And it's time to get on board – right now. About a year ago, my friend and colleague Porter Stansberry gave some big-picture advice on buying a home in the Stansberry Digest. I believe the opportunity now is even better than it was then. So read on for Porter's take – and for details about my upcoming real estate event...

I can't tell you whether or not you should buy a house...

And although I bridle at the restraints on my right to free speech, even if I were allowed to offer you my individualized advice, I would refrain. I simply can't know what's right for you without knowing a lot more about you, your finances, and your goals.

On the other hand, I do have a philosophy about personal finance that I believe will help you make that decision for yourself.

I believe the purpose of saving and investing is to provide financial security – not to own a home or any other asset.

However, for a lot of people, owning a home is a critical part of their financial plan. Let me show you what I mean...

Homeownership can provide a way for you to leverage the power of credit in our economy to your benefit. It can also help shield you from the impact of inflation and the deterioration of the U.S. dollar.

And it can turn part of the money you'd spend in rent into equity in real property – a form of savings.

It can be expensive to own a home. I'd recommend making sure you can easily afford a 20% down payment. I'd also make sure I had at least one year's worth of mortgage payments available in savings first.

After those hurdles, there's a slew of questions that you should think carefully about. The most important is: What's the cost of your mortgage? If you have a low-interest, low-cost mortgage, buying a house can be a great deal.

Next, I'd try to figure out all of my costs to own a home (e.g., mortgage origination, interest expenses, taxes, and upkeep) for the period that I'm likely to live there.

So, for a $350,000 home over, say, 10 years, that's probably something around $200,000 in total expenses, including interest payments. Seems like a lot, doesn't it? Well, I'm only assuming an average 3% interest expense over 10 years, a 1% annual maintenance cost, and 2% for property taxes and insurance. Your actual costs of homeownership will likely be higher, including the principal repayment on your loan.

But let's use this rough estimate for now. That's roughly $20,000 in expenses per year to own your home. You could rent a house for $1,500 a month and probably save money – or at least, it would look like that in the short term.

Over the long term, though, the picture changes...

The money you "spend" to buy a house can end up becoming a form of savings – as long as the house appreciates in value.

Look at these assumptions. At the end of 10 years, you'll own roughly 65% of the house (assuming a 15-year mortgage). And assuming real estate prices have increased 20% to 25% over the period, your house should be worth roughly $435,000 after 10 years.

That means your equity would be worth about $280,000, or 40% more than your direct expenses. So even though buying costs more than renting, it can still be the better way to go.

For most people who buy houses in areas that have both rising populations and rising wages, owning a home can easily be one of the most important and best financial decisions they make. Buying instead of renting essentially allows them to turn one of their biggest expenses – rent – into a form of savings.

Just be aware that the financial outcome of buying a house depends almost entirely on what you have to spend to borrow the money, and on whether or not the area you buy in appreciates in value while you own the home.

If both these conditions are in your favor... it can be a great decision for your long-term wealth.


Porter Stansberry

Editor's note: Here's another secret... You don't have to buy physical property to make big money in real estate. Not only that, but the timing is perfect to get in on this asset class today. That's why on June 24, Steve is going public with ALL of his real estate experience for the first time ever... and sharing what he believes is the No. 1 best way to get started right now. Sign up here to watch Steve's free event.

Further Reading

New housing starts are down drastically since the coronavirus outbreak began. And even during the pandemic, supply still hasn't caught up with demand. That makes this market sector a smart bet today... Read more here: The Simple Way to Profit From a Housing Boom.

"Real estate underlies nearly everything in modern civilization," Peter Churchouse writes. With real estate being as important as it is, it's surprising to see how many folks ignore it as a portion of their portfolio. Thankfully, this strategy gives you an easy way to be a stock market "landlord"... Get the full story right here.

DailyWealth Premium

A key factor is just as important as what type of real estate you invest in. And that's why you need to understand this tip before you can succeed in this sector...

Market Notes


Today's company is surging along with the online shopping trend...

As we've covered before, online sales have gotten a boost from global lockdowns and the pandemic. Companies like Amazon (AMZN) and MercadoLibre (MELI) have soared as a result of this tailwind. And today's company is riding that same trend...

Wayfair (W) is a $20 billion home-goods and furniture e-commerce company. From "household brands to everyday bargains," Wayfair sells the items that folks stuck at home want most right now. And although the company is still in its growth phase and has yet to turn a profit, it recently released excellent quarterly results... Net revenue increased to $2.3 billion, up 19.8% over the same quarter last year. And its number of active customers topped 21 million, a 28.6% year-over-year increase.

Wayfair shares are up big since their March lows. And they're up more than 160% in the past three years. As long as COVID-19 fears boost the online sales trend, these gains should continue...