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Is Owning a Home Still the American Dream?

To buy or not to buy? Ask yourself these questions before you make the leap.

Credit: Getty Images
Credit: Getty Images

Written by Shira Boss

Homeownership in the U.S. hit a nearly 18-year low in the second quarter of 2013, according to the Department of Commerce. The rate declined to 65.1 percent, the lowest level since 1995. 

With prices booming but less people owning houses, is home ownership still a wise investment? Ask yourself these questions before making a decision: 

1. How long will you live there?

We’ve all heard the traditional argument for buying: Why “waste” money on rent every month, when those funds could go towards building equity in a house? But experts say it’s not that cut and dried.

“Housing is typically a person’s largest expense, and being able to retire in a paid-off house removes a huge burden in retirement,” said David Taft, a homeowner in Alpharetta, GA. 

However, buying a home and living in it forever is a rarity these days. Taft himself purchased a second home in only two years when he was promoted and transferred. And the less settled you are, the more risky owning a home becomes. Prices might have dropped in the short term, and the transaction costs of selling are high.

Wendy Wilkie and her husband regret buying a house 15 years ago in Winston, GA. The neighborhood has changed, and they want out—but now they are stuck. Property taxes also are a burden, Wilkie said. “I understand some people would love to be able to own a home, but I say don’t do it,” she said. “It is definitely no longer the American dream to us.”

2. Are you a Mr. or Ms. Fix-It?

The cost of maintaining your own property—and making improvements—comes as an unpleasant shock to many first-time homeowners. Experts recommend budgeting about 2 percent of the value of your home each year for maintenance. 

“We took out our first loan from the bank and ended up needing a lot more after that,” said Kim Lash, who purchased a fixer-upper with her fiancé a year and a half ago in Palos Hills, Illinois. “The house needed so much more work than we could have imagined—a new roof, the bathroom floor caved in, the wiring was bad, the plumbing was bad… it was basically nightmare after nightmare.” They’re thrilled with the results, but they are now “very much in debt.” 

Don’t make the mistake of comparing rent to a mortgage payment without taking into account the cost of repairs, replacements, and emergencies.

Expect to invest your time, as well. “Yard work is time consuming and when you work so much, it’s hard,” Lash said, adding that the expense and effort are still worth it: “One day I’ll be bringing home a baby to this home, and that’s my American dream.”

3. Can you really afford it?

Home loans can be complicated, and some come with fees and rate increases that build over time. Make sure you fully understand all the terms before you sign.

And while down payments have shrunk, making buying a home easier, it also can inadvertently entice you to committing to home ownership before you’re really ready financially. Make sure to do your homework and determine how much you can really afford before you pursue such a long-term investment.

TELL US: Is owning a home still the American Dream? When is it better to rent? Post your thoughts in the comments section below.

About this series: As part of our Smart Spending reporting, Patch is profiling people across the country who have found creative ways to save money. If you're a smart spender, we want to hear from you! Share your story here or in the comments section below. 

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