Polls / April 18, 2011

Do you think buying a home is a purely financial decision?

Buying a home is not purely a financial decision, say 73% of more than 2,300 respondents to the eZonomics online poll.

Shall we rent or buy?
Buying a home is a big financial decision – but for many people factors other than money also come into play. The video tutorial Should I rent or buy? tells how renting might suit people with more flexible lifestyles, who want to spend less time on property maintenance and who need the ability to move quickly. On the other hand, buying is typically aligned with stability and living in a location for many years. It is often seen as giving the owner more control over housing decisions, such as when to carry out maintenance or improvements and how to decorate the property. However, the attitudes to renting and buying vary from country to country, with homeownership a common goal in some places and lifetime renting common elsewhere.

Taking emotional control
The idea of owning a house can tug on the emotions of a potential buyer. University of Southern California Professor Richard Green writes on his Real Estate and Urban Economics blog that “there is something about real estate” compared with other forms of investment because homeowners can touch and feel property. Green writes there can be a sense that investors “may not be able to control (financial) markets but one can control the management of real estate that one owns”. But housing decisions can be complicated. Green says that people who can’t afford homes should not overborrow to get one. And there is a risk of underestimating the financial risks of homeownership because of the emotional and physical attachment to property.

Remember, house prices go down as well as up
Buying can be seen as an investment for the future – but it should be remembered that as with all investments, there is a risk of losing money investing in a home. ING Group chief economist Mark Cliffe detailed a boom and bust in house prices in the United States in his video Lesson 2 from the financial crisis. He says “speculative fever” was created through a boom in house prices between the late 1970s and 2007 but that boom was followed by “an almighty bust”.

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eZonomics team
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