Where you live can significantly affect the long-term value of your home, according to another Smart Asset Study.
SmartAsset examined home prices dating back to 1997 across 400 metropolitan areas in the United States and ranked each based on home value growth and price stability, which is the probability that a home will see a price drop of 5% or more at any time in 10 years after buy them.
While major markets such as Austin, Texas, have seen home price growth of 384% since 1997, the value of homes in only 15 of the lowest-ranking markets by value has increased an average of 84% in that time.
The lowest-rated markets tend to be in the so-called rust belt states: former manufacturing centers that experienced long-term industrial declines. These include Ohio, Pennsylvania, West Virginia, Wisconsin, and Michigan.
While past performance is no guarantee of future results, the study does provide some insight into the desirability of a particular market over time.
Homes provide utility, not just value
As an investment, the annual return on home prices varies widely depending on the local market. Generally speaking, the stock market offers better long-term returns and more liquidity.
However, homes are not just financial assets. They provide utility as places you can live in for decades.
Owning a property provides some cost confidence to your budget as well, as monthly mortgage payments tend to be predictable and stable over time. This is especially important for people with fixed incomes, such as retirees, or people who are unable to work.
Plus, with home ownership, thousands of dollars that would have been spent on rent payments go to an asset that you will eventually own and can sell later. And since the interest on your mortgage is tax deductible, your annual taxable income will likely be reduced by thousands of dollars.
Plus, with a large down payment, home ownership can reduce monthly costs compared to rent, making it easier for you to budget for other expenses.
Open an account now: Get smarter about your finances and career with our weekly newsletter
do not miss: Why a 26-year-old with $350,000 in student loans wouldn’t use a credit card
“Reader. Infuriatingly humble coffee enthusiast. Future teen idol. Tv nerd. Explorer. Organizer. Twitter aficionado. Evil music fanatic.”