Harvard’s 5 Financial Reasons to Buy a Home

Eric Belsky, Managing Director of the Joint Center of Housing Studies at Harvard University, also currently serves on the editorial board of the Journal of Housing Research and Housing Policy Debate. Last year, he released a paper on homeownership - The Dream Lives On: the Future of Homeownership in America. In his paper, Belsky reveals five financial reasons people should consider buying a home. 

Here are the five reasons, each followed by an excerpt from the study: 

1. Housing is typically the one leveraged investment available.
“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

2. You’re paying for housing whether you own or rent.
“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”

3. Owning is usually a form of “forced savings”.
“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

4. There are substantial tax benefits to owning.
“Homeowners are able to deduct mortgage interest and property taxes from income. On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”

5. Owning is a hedge against inflation.
“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”

Bottom Line
We realize that homeownership makes sense for many Americans for an assortment of social and family reasons. It also makes sense financially. 

From Keeping Current Matters

Is a Tankless Water Heater Right for You?

If you are debating replacing your hot water heater with a tankless version, here’s what you need to know to make the right decision.

 

What’s the Advantage of going Tankless?

Traditional hot water heaters typically live in your basement and provide gallons of hot water at one time: an 80-gallon tank heats enough water to shower, run a dishwasher, and do a load of laundry simultaneously. But standby energy loss is significant with traditional hot water heaters, and once you’ve exhausted the hot water supply, you’ll wait 20 to 60 minutes for the heater to cook up more.

A tankless water heater produces hot water only when you need it. When you turn on the faucet, water is heated on the spot as it flows through capillary-like pipes heated by either a powerful gas burner or electric coils.

According to the U.S. Dept. of Energy, a tankless water heater is more efficient and uses less energy than a conventional water heater, providing a $25 to $107 in annual savings. By bringing hot water close to where it’s needed, you reduce energy loss and increase efficiency by 50% over a conventional hot water tank system.

What’s the Downside?

Although a tankless water heater can pump hot water all day, it can’t produce a large amount all at once. And it can snap you out of a hot-shower bliss with the “cold water sandwich effect,” a sudden splash of cold water that results from turning the hot water faucet on and off repeatedly.

A traditional tank heater puts out 7.5 to 9.5 gallons of water per minute (GPM), enough to shower, run the dishwasher, and do a load of laundry all at the same time. The typical tankless water heater, however, puts out only 2.5 to 5 GPM, enough to handle only two uses at a time.

Possible solution to the “cold water sandwich”: Install multiple on-demand units. Because it’s small — about the size of a carry-on suitcase — you can place a tankless water heater along any stretch of pipe: In the attic, basement, closet, or crawlspace. You can install two or three units to serve different parts of the house, or even dedicate a unit for a particular use — say, a washing machine. Multiple on-demand units increase overall energy efficiency.

How Much Do They Cost?
Gas-fired tankless water heater: This system costs $1,500 to buy and install, nearly double the price of a conventional gas water heater, and $575 more than a high-efficiency tank model. In addition, while a conventional water heater typically uses a half-inch gas line, a tankless water heater requires three-quarter-inch pipe. That plumbing change costs from $25 to $40 per foot, potentially adding many hundreds to initial costs.

Electric tankless water heater: Much cheaper. It can cost as little as $400 installed. But it doesn’t qualify for a tax credit because it is less efficient than gas and is better suited for point-of-use applications, such as instant kitchen hot water, rather than a whole-house system.

 

Courtesy: HouseLogic

​Check out all homes for sale in Columbia and Lexington at www.homesincolumbiasc.net

 

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