2022-11-25 13:00:12

This Redfin Economist Says You Shouldn't Think of Your Home as an Investment. Here's Why

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Nasdaq
By The Motley Fool

Image source: Getty Images

There's a reason so many people are drawn to homeownership over renting. When you rent a home, your money is used to pay a landlord's mortgage. And it's that landlord who gets to build equity in an asset that has the potential to increase in value over time.

On the other hand, when you own a home, every mortgage payment you make gets you closer to owning that asset outright. And since home values can climb over time, you have the potential to sell your home for a much higher price than what you paid for it.

But while homes have the potential to gain value, it's important to look at yours as an expense, not an investment. And getting on board with that line of thinking could help you avoid buying the wrong property or making a poor financial decision.

Your home doesn't have to be an investment

You might load up on stocks in your brokerage account in the hopes of having those assets gain value over time. And that's a perfectly fine strategy.

But while stocks clearly count as an investment, your home shouldn't necessarily fall into the same bucket. In fact, Chen Zhao, Economics Research Lead at Redfin, recently tweeted, Your house can be an asset, but your primary goal is providing a place for your family to live. And that advice is really spot-on.

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