Where you live can dramatically affect the long-term value of your home, according to a recent study SmartAsset study.
SmartAsset looked at home prices dating back to 1997 in 400 metropolitan areas across the United States and ranked each based on home value growth and price stability, i.e. the likelihood that a home experiences a price drop of 5% or more at any time during the 10 years after it is purchased.
While major markets like Austin, Texas have seen home price growth of 384% since 1997, homes in the 15 lowest-ranked markets have only increased in value by an average of 84% over that year. period.
The lowest-ranked markets tend to be in what are known as Rust Belt states: former manufacturing centers that have experienced long-term industrial declines. These include Ohio, Pennsylvania, West Virginia, Wisconsin and Michigan.
Although past performance does not guarantee future results, the study provides insight into the desirability of a given market over time.
Homes offer utility, not just value
As an investment, the annual house price return varies greatly depending on the local market. And generally speaking, the stock market offers better long-term returns and more liquidity.
However, houses are not just financial assets. They offer utility as places you can live in for decades.
Owning a property also provides some cost certainty to your budget, as monthly mortgage payments tend to be predictable and stable over time. This is especially important for people on fixed incomes, such as retirees or people who are unable to work.
Plus, with home ownership, thousands of dollars that would otherwise have been spent on rent are spent on an asset that you will ultimately own and can later sell. And since the interest on your mortgage is tax deductible, your annual taxable income can potentially be reduced by thousands of dollars.
Plus, with a large down payment, home ownership can lower your monthly costs compared to renting, making it easier to budget for other expenses.
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