The real advantage of putting money into home ownership is that you’re incented to ride this investment out through ups and downs, because not only is it an investment — it’s also the roof over your head!
Housing is a market just like stocks. Since we see stock prices reported every day, we are more aware of the swings. And it’s easy to liquidate a stock position at a very low cost. But home prices move in longer waves, though they are also impacted by the economy and interest rates.Are we about to see another housing price downturn? Despite a doubling of mortgage interest rates in the past year, home prices have remained fairly stable.
Some of the froth is already out of the housing market. The home affordability index is near record lows. And with fewer people able to afford a new home purchase, rental prices remain stubbornly high. Ironically, higher overall housing costs are a key factor keeping the Fed active in raising rates to fight inflation. They may go too far in their rate hikes, causing a housing collapse.