On the "bad investment" side are some cold, hard facts. In terms of real dollars, home values barely outpace inflation over time, and they can actually decline. If you do sell your house for a lot more than you paid for it, your gains are offset by several costs that accrue to any house: mortgage interest, insurance and fire protection costs, together with the fees and expenses associated with the purchase and sale transactions themselves. Also to be deducted are the costs of improvements and/or repairs made during the owner's tenure. When you subtract all of these, home ownership does prove to be an expense, overall. Not even a middling good investment.
Why then do so many people aspire to home ownership, and why are so many convinced that they are, in fact, making a good investment? The answer lies not in the financial calculations, but in our attitude toward home ownership. It is, simply put, a part of the "American dream," not to mention the numerous advantages of being able to exert a measure of control over your living space. We have long associated the idea of "family" with the notion of "home and hearth." Apartments are for singles.
Because the nominal price (the price in current dollars, not the same dollars used to purchase the house) of a house does tend to go up over time, people may take a measure of security from knowing that they won't "lose money" when they sell. And selling a family house in order to purchase a smaller, cheaper property for retirement is a common practice. But you should never have the house as the centerpiece of your retirement plans, as you might do with a stock portfolio (generally considered to be an excellent long term investment).
Homesteaders have numerous options to capitalize on their status as property owners to help defray some of those costs of home ownership:
- vegetable gardening can reduce the grocery bill
- adding perennial food plants, like fruit trees, makes sense when you own
- you have the option to invest (really) in improvements that will bring long term savings in energy costs
- you can own domestic animals, in some locations
- you can operate a business from your home, sometimes with local restrictions