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Despite the recent fluctuations in real estate prices nationwide and
sale prices that have fallen short of sellers' expectations,
homeownership has proved to be a good long-term investment, financial
experts agree.
Buying a home is the largest investment most people will ever make, said
Shrikant Nadkarni, a certified public accountant, certified financial
planner and shareholder at WithumSmith+Brown PC's Somerville, N.J.,
office.
“Owning a home over a long period of time is generally a good
investment idea,” Nadkarni said. “It brings financial
obligations and forces savings through paying down the mortgage while
building equity.”
Andrea Pemberton-Fowler, 54, who
recently sold her North Brunswick, N.J., home for $349,000 —
considerably more than the $155,000 she and her late husband bought it
for in 1990 — has considered the cost of upkeep on the house over
the years and its impact on her finances. The youngest of her three
children is now in college.
“I guess if I hadn't had the house I wouldn't have the money
that I'm getting now, because I probably would have spent it instead of
putting it somewhere . . . with kids there's always something,” she
said. “But if I had been able to save all the money that I put in
to the house and invest it I'm not sure if I would have made out better
or not.”
People who bought their homes in the 1970s and 1980s and held onto
them until the past five years or so, made out well, said Bill Hanley,
president-elect of the New Jersey Association of Realtors.
“We had this wonderful market over the past few years, and that
group of people didn't get hurt.” Hanley said. “In the long
run across the country, people have not really lost in real
estate.”
“I think anybody who's buying now should not be looking at a
house as an investment,” said David Walter, president and chief
investment officer of Halberstadt Financial Consultants Inc. in
Princeton, N.J. “Look at it as a place to live for the long term,
but don't look at it to give you a return the way it did over the last 10
years.”
Gloria Zastko, of Gloria Zastko Realtors in North
Brunswick, said recent price downturns are nothing new in
real estate. But she cautioned people about the more exotic mortgages
available, which enable people to buy with no money down or with
adjustable rates (ARMs).
“When the housing prices do dip a bit this is going to be a
deadly thing. . . . Their monthly payments will go up. It's just too bad
that the criteria is not a little more stringent to make sure that these
people can afford to continue with these houses. Surely people should buy,
but they should be qualified to buy.”
Nadkarni said that in today's market, with rising interest rates and
softening real estate prices, buying a home to make a short-term profit
is certainly not an attractive proposition.
“When purchasing your home and taking on a mortgage, it is
important to review your cash flows and factor the tax benefits from the
deductions prior to deciding on the home you can afford to own,” he
said.
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