According to a recent SmartAsset study, where you live can drastically affect the long-term value of your home.
SmartAsset studied 1997 house prices in 400 metro areas in the United States and ranked them based on the growth in value and price stability of the home, d years after purchase.
While top markets like Austin, Texas, have seen home price growth of 384% since 1997, homes in the 15 lowest-ranked markets have only appreciated an average of 84% over that time.
The subordinate markets are typically located in so-called rust belt countries: former manufacturing centers that have experienced long-term industrial decline. These include Ohio, Pennsylvania, West Virginia, Wisconsin and Michigan.
While past performance is no guarantee of future results, the study provides insight into the attractiveness of a given market over time.
Homes offer utility, not just value
As an investment, the annual return on home prices varies widely depending on the local market. And in general, the stock market offers better returns and more liquidity over the long term.
Homes are not just financial assets, however. They offer utility as places to live in for decades.
Owning a property also provides some cost certainty to your budget as monthly mortgage payments tend to be predictable and stable over time. This is especially important for people on a fixed income, such as retirees or people who are unable to work.
Also, homeownership frees thousands of dollars that would otherwise have been spent on rent payments into an asset that you can ultimately own and later sell. And since the interest on your mortgage is tax-deductible, your annual taxable income could potentially be reduced by thousands of dollars.
Additionally, home ownership with a sizable down payment can lower your monthly expenses compared to renting, making it easier to budget for other expenses.
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