Notes

Frank Owens, Ltd. Review: Building a Home is Building Wealth

Buying a home requires an individual or a family to incur one of the biggest single expenses within a lifetime. It is both a big risk or gamble as well as a large investment. Risk, as in any adverse event, such as losing a job or any circumstance that leads to one’s failure to pay the mortgage, can jeopardize the project. Obviously, it is a potentially good investment as it gains value in time from which an owner can gain equity or take out a loan from -- or monetize completely through selling at a profit. While some persons may not need or never avail of such benefits from owning a home due to certain principles or qualms, building one’s personal worth or credit level can come as a great advantage in the present economic conditions.

Moreover, one can look at owning a home as a kind of forced savings since regular monthly payments can be equated into imaginary inputs into a virtual savings account from which one can withdraw at any time, partially or as a whole. This unique feature of a residential building which most of us see simply as a physical domicile, in fact, serves as a great source of economic opportunities for a nation. In recent times, we have seen how home mortgages have been used to provide significant wealth to people who were engaged in the stock markets in order to benefit their corporations at the expense of homeowners and other investors.

In effect, residential housing contributes to a nation’s GDP (Gross Domestic Product) through residential fixed investment (meaning, new building construction and improvements) and personal consumption expenditure (referring to various housing services, such as gross rents paid, etc.). Residential fixed investment (or RFI) provides a measure for homebuilding and remodeling’s contribution to the GDP.

Investment in homebuilding has historically shared an average contribution of 5% of the GDP although in 2010 it was down to 2.5%. Housing services, on the other hand, averaged from 12 to 13%.

So, next time you think of writing a check to pay the rent or the mortgage for your home, you need to realize that you are not getting poorer for it but enriching yourself as well as the whole nation.