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Why Buying A Home Is A Smart Investment For Millennials
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Millennials have been reluctant to buy homes because of a volatile job market & high student debt. By Amanda Falcone | Contributor Sept. 22, 2015, at 11:11 a.m. http://money.usnews.com/
Millennials are swarmed with investing advice – start saving early, take advantage of your employer’s 401(k) match and for heaven’s sake, dump those high-interest credit cards! But for many who are looking to build a retirement nest egg, financial advisors say purchasing a home is one of the best investments millennials can make.
“Buying a home is one of the smartest financial decisions you can make as early as your 20s,” says Riccardo Ravasini, managing director of Rava Realty, who handles properties in New York and Florida, “because it is inflation-protected and a physical asset that doesn’t disappear like stocks can do.”
Nationwide, millennials have been reluctant to buy homes for various reasons, including a volatile job market, high student debt and the delaying of life events, such as marriage. The rate of homeownership for millennials dipped to a low of 36.2 percent in 2014, according to U.S. Census data, although it’s also worth noting that the millennial generation represents the largest percentage of first-time homebuyers.
Financial and real estate professionals say the numbers are now slowly improving, and they are hopeful that more millennials will soon recognize the benefits to homeownership. Here are some reasons why financial experts say young adults should be investing in the housing market:
You’ll spend smarter. Rent payments go straight into the pocket of the landlord – and at the beginning of the next month, you’ve got nothing to show for it.
But mortgage payments are an investment in the future, says Tony Via, an assistant finance professor at Kent State University in Ohio. As the remaining balance on a mortgage is reduced, home equity increases, padding your own retirement account – and not your landlord’s. Better to spend your money on your own home than on unnecessary, short-term expenses that won’t provide value later, he says.
Consider the resale value. Property in solid markets such as New York, Miami or San Francisco is a good investment because those areas attract professionals who want to be there for a long time. Buying in areas where the market is trending up can increase net worth, Ravasini says.
Home prices in the Big Apple doubled between 1990 and 2000 and again between 2000 and 2012. The Standard & Poor’s 500 index saw a huge 315 percent increase from 1990 to 2000, but only a 14 percent rise from 2010 to 2012.
Enjoy the tax breaks. Mortgage interest is deductible from your income tax, lowering your tax burden to Uncle Sam. And homeowners usually don’t have to pay a capital gains tax when they sell if the property value increases by less than $250,000 and if the home has been occupied as a primary residence for more
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