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If you’re thinking about buying a home among the heavy competition in Southern California’s housing market, you may become discouraged. Then again there are excellent reasons to still buy that home you really want.

As a homeowner, you’re building equity and wealth for your future.  Your home should appreciate in value and your monthly payment stays the same with a fixed rate mortgage. For most Americans, owning a home is still an important element in building wealth.

As most renters know firsthand today, rents can be increased once your lease has expired. Landlords make a decision if specific repairs are completed within days or postponed for months and months. Moreover, in a lot of cities, tenants can be evicted or charged for very minor things.  Owning a home provides growth and protection that renting basically doesn’t.

1. Home Equity Loans

Credit card interest usually costs between 18% and 22%, and when you carry a balance, there’s no deducting the interest you paid. Equity loan interest is usually much lower, so it makes sense to use a home equity loan to pay off other forms of debt for homeowners who have equity built up.

2. Mortgage Reduction Creates Equity

A portion of your monthly mortgage payment goes directly to the loan’s principal balance, which reduces your financial obligation. And home loans are usually amortized, which means that as time goes on, less of the payment will go to interest, and more will go toward the principal. In other words, more of your payment will go to the principal near the end of the loan than at the beginning. So, the longer you live in the home, the more equity you build.

On a 800,000 3 bedroom home with 10 percent down with an interest rate of 3.25% the payment is $3,133 per month.

That same 3 bedroom in Costa Mesa,CA rents for $4,000 to $4,500. In addition, as a homeowner you can rent out both rooms or build an accessory dwelling unit to generate income to help pay your mortgage.

3. Home Appreciation

Most housing experts are stating that home prices will continue to increase during the next few years.  In the latest Home Price Expectation Survey, by more than one hundred economists, real estate experts, and investment and market strategists, estimate home prices to rise annually at rates of:

•           2021: 6%
•           2022: 4.5%
•           2024: 3.6%
•           2025: 3.5%

4. More Flexibility to Live Where You Want

Did pandemic lockdowns put you in a work-from-home situation in 2020? If you’re like millions of other Americans, you may be working from home either most of the time or permanently. That means you have greater flexibility than ever before in choosing where to live.

If you no longer have to worry about being close to the office or to the metro to make for simple commuting, now may be the time to buy that country home or a larger residence (with more home office space!) in the suburbs.

If you have stable employment and income, didn’t experience a major downturn in working hours or salary during the pandemic, you’re likely well-poised to buy a home right now.

5. Make a Goal to Be Without a Mortgage During Retirement

One of the biggest reasons why buying a home is worth it? Once you pay off your home, you own an appreciating asset free and clear. You are no longer paying the bank. 

Did you know that thirty-seven percent of U.S. homes are owned free and clear of a mortgage?  This is a goal many aspire to in their golden years because they understand their personal income tends to be fixed and decrease as you age.

When you get into your retirement years, the amount of your monthly mortgage payment is even more crucial as your income is stable yet typically lower.  By minimizing or getting rid of a big monthly expense like a mortgage you significantly increase your monthly budget and can enjoy vacations and leisure activities.

Just because you buy now and the home isn’t the one you’ll live in forever after, you have control and are able to sell your home to help with your retirement. The average American has around two times more equity in their homes as they have in their investment and retirement accounts. Selling your home enables you to access your equity and apply it as you wish. You may decide to downsize into a smaller home or relocate to a state with a lower cost of living and better quality of life.

6. Capital Gains Exclusion

Once you feel it’s the correct time to sell, you’ll welcome the tax waiver on capital gains of $250,000 for single homeowners and $500,000 for married homeowners filing jointly.  Any profit above these thresholds is considered profit and means you’ll have to pay taxes on that difference.

You must meet both the use and ownership test and have lived in or used the home as the primary residence for a minimum of two years out of five leading up to the sale date. The good news is that the ownership and use tests don’t have to occur during the same two years; they just have to be at some time during those five years.

The Bottom Line

Owning a home does introduce some new responsibilities, so be sure you are ready before taking the plunge. And while not every housing market is created equal, there are still many affordable markets around the country. Sure, you may not be able to buy your first home in a state like California, New York, or Florida, but there are other great states such as Ohio, Michigan, Maryland, and more where your dream can be a reality!

In the end, be sure to conduct plenty of research, and don’t forget to weigh your pros and cons!