On the topic of housing: this is going to vary very widely from market to market and person to person, but I want to bring up a few points.
A home is primarily a place to live, not an investment. Don’t spend more on a home than you comfortably can just because you see it as an investment
If you have skills to do repairs and improvements yourself, or can acquire such skills, this can let you buy much cheaper, and/or sell higher if you do so carefully and thoughtfully (buying something you like that most buyers in your area don’t, or renovating in a way that will appeal to many buyers).
Leverage. On average home values in your area may only go up 3% a year or whatever (in my region it’s been slightly higher since the time I bought in 2014, and much higher in 2020), but I bought my house with 5% down (20x leverage) at 3.5% interest. In addition, my mortgage + interest + PMI for the first 2 years + higher utilities was still less than I’d previously paid in rent for a two bedroom apartment, even before accounting for the equity I was building. By the end of year 3 I’d more than made up for the transaction costs of buying and (at some point) selling. Also, I had more space, no landlord, and no annual rent increases.
Legal protections for owners in some states are different than those for renters. In my state, up to 500k in home value is protected from seizure if you declare bankruptcy, and from many types of liens. In some states, homeowners have their annual property tax increase capped.
Capital gains: 250k (500k for a couple filing taxes jointly) is exempt from federal capital gains tax when you sell your primary residence. This may not matter if you’re comparing to an IRA or 401k, but it matters when comparing to sales of investments in a normal brokerage account.
Income taxes: In previous years the mortgage interest deduction made a difference to me of a few thousand dollars a year, but when they raised the standard deduction to over $12k/person and capped the deduction for state and local taxes, I stopped being able to benefit from this (I would still gain some benefit if I were single, or if I lived in a more expensive house, or if I had lots of other deductions I could claim).
And on emergency funds: right now my emergency fund is smaller than I’d like, but I also have a low-interest HELOC I know I could borrow against if I needed to, without locking up as much cash (which matters to me because in the meantime I can use my cash to pay down other debts). I am planning, early next year, to sell the house and greatly reduce my fixed monthly expenses in order to pay off my remaining debts and start saving a lot more. Once I do so, I will need a significantly larger emergency fund than I have now.
On the topic of housing: this is going to vary very widely from market to market and person to person, but I want to bring up a few points.
A home is primarily a place to live, not an investment. Don’t spend more on a home than you comfortably can just because you see it as an investment
If you have skills to do repairs and improvements yourself, or can acquire such skills, this can let you buy much cheaper, and/or sell higher if you do so carefully and thoughtfully (buying something you like that most buyers in your area don’t, or renovating in a way that will appeal to many buyers).
Leverage. On average home values in your area may only go up 3% a year or whatever (in my region it’s been slightly higher since the time I bought in 2014, and much higher in 2020), but I bought my house with 5% down (20x leverage) at 3.5% interest. In addition, my mortgage + interest + PMI for the first 2 years + higher utilities was still less than I’d previously paid in rent for a two bedroom apartment, even before accounting for the equity I was building. By the end of year 3 I’d more than made up for the transaction costs of buying and (at some point) selling. Also, I had more space, no landlord, and no annual rent increases.
Legal protections for owners in some states are different than those for renters. In my state, up to 500k in home value is protected from seizure if you declare bankruptcy, and from many types of liens. In some states, homeowners have their annual property tax increase capped.
Capital gains: 250k (500k for a couple filing taxes jointly) is exempt from federal capital gains tax when you sell your primary residence. This may not matter if you’re comparing to an IRA or 401k, but it matters when comparing to sales of investments in a normal brokerage account.
Income taxes: In previous years the mortgage interest deduction made a difference to me of a few thousand dollars a year, but when they raised the standard deduction to over $12k/person and capped the deduction for state and local taxes, I stopped being able to benefit from this (I would still gain some benefit if I were single, or if I lived in a more expensive house, or if I had lots of other deductions I could claim).
And on emergency funds: right now my emergency fund is smaller than I’d like, but I also have a low-interest HELOC I know I could borrow against if I needed to, without locking up as much cash (which matters to me because in the meantime I can use my cash to pay down other debts). I am planning, early next year, to sell the house and greatly reduce my fixed monthly expenses in order to pay off my remaining debts and start saving a lot more. Once I do so, I will need a significantly larger emergency fund than I have now.