For most people, your house is your biggest asset and also your biggest liability. So it’s understandable to think about the financial implications of the most significant purchase you’re ever going to make. But a home is about more than what you buy it for and what you think it will be worth in ten years.
A home is the roof over your head. It’s what you miss when you’re gone too long. It’s where you raise a family. It’s where you make some of your most special memories.
Obviously there are financial considerations to take into account. First and foremost, can I afford it? And that’s pretty much the extent of it. You don’t want to be house rich and cash poor. The fact that you shouldn’t dramatically overpay goes without saying, but for the sake of actuallies, I’m saying it.
The last thing that should enter the equation when thinking about buying a house is the macro situation. At least most of the time. If you’re in a super hot housing market that went up 30% in 6 months, then yeah you should probably take that into consideration. But for most people most of the time, this isn’t anywhere near the top of the list in terms of what’s important.
A house is so many things, but an investment? I don’t know about that. I mean, okay I guess in a sense it is, given that it could be your biggest asset in retirement, but that shouldn’t drive the decision you make today.
Ben and I got into this and much more on this week’s episode of Animal Spirits.
Michael Batnick is a managing partner at Ritholtz Wealth Management. He is the co-host of Animal Spirits, What Are Your Thoughts, and The Compound and Friends. For disclosure information please see here.