| Purchasing a home generally requires significant upfront expenses, including a down payment and closing costs. Homeowners are responsible for all repairs and maintenance, which can be time-consuming and costly. Homeowners must pay annual property taxes - which are substantial in some areas - and banks generally require property insurance, which can also be expensive. Owning a home can make it more challenging to relocate for a job or capitalize on other opportunities, reducing the homeowners' flexibility. And, while home values generally appreciate over time, there's always a risk of market downturns affecting property values. Given these challenges, some families - and especially young people who are not yet settled - may opt to forego home ownership, at least in the near term. Yet most Americans want to own a home and enjoy the many advantages. The biggest is that homeownership allows individuals to build wealth over time as they pay down their mortgage and property values appreciate. Aside from building equity, there are tax benefits. Homeowners can deduct mortgage interest and property taxes, providing financial advantages. Fixed-mortgage rates offer predictable housing costs over time, unlike rising rents. Homeowners have the freedom to customize their living space, adding to their quality of life. And owning a home often leads to stronger community ties, which are important to many people. Despite these many advantages, it's important to realize that houses are not always great investments. This will come as a surprise to homeowners who have benefited from the hot housing market recently, but - historically - the typical home has only slightly outpaced inflation. Of course, most homeowners use leverage. They put down only a fraction of the cost of the house as a down payment. That means even a modest uptick in the price can result in an attractive return on the total dollars invested. Yet it's important to remember that leverage is a double-edged sword. A downturn in the price of a home can quickly exceed the value of the money invested, resulting in a serious loss, although history shows this is the exception not the rule. The stock market has provided a far superior return to most real estate. For example, the S&P 500 - while more volatile than home prices - has delivered a long-term average annual return of slightly over 10%. (Plus, index funds are far more liquid than real estate, have dramatically lower transaction costs, and require no active management or out-of-pocket expenses.) Many renters have earned higher returns over the past few decades by buying a diversified portfolio of stocks rather than making mortgage payments... and preserved their freedom and flexibility along the way. As one friend advised me recently, "Live like a king... rent everything." That's fine for some people. Others want the stability, equity, and other financial and aesthetic advantages of homeownership. The problem is that many would-be homeowners insist that they don't have the credit to qualify for a mortgage, the income to afford current interest rates, or the money to cover all the closing costs. I had these problems too as a young man in my 20s. Yet I bought my first home with no money down, no mortgage qualifying, and a low payment when mortgage rates were more than twice as high as they are now. I'll explain how in my next column. Good investing, Alex | 
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