So I’m a little weird and have a slight obsession with HGTV. I’m not particularly fond of the decorating shows, but when it comes to shows on the home buying process I’m pretty much an addict. I was watching “My house is worth what?” last night when I had an epiphany: I don’t want my house to be an investment.

This show focuses on individuals that are having their homes appraised. One of the couples in yesterday’s episode said they wanted their house appraised because they had not saved for retirement properly and they were hoping the equity would provide some funding for their later years. Those people are freakin’ crazy!

I know a lot of people are eager to purchase homes because they consider them a “good investment”. I wont argue with them, but I don’t ever plan to classify my residence as an investment. Instead, my home will be a forced savings account.

Once I get to experience the joys of home ownership, I never intend to return to renting. What does this mean? I don’t consider home ownership an investment because I am always going to need a place to live. Although it’s true that I will probably build equity in my home over the years, I am reminded there is a difference between paper gains and realized gains. I feel like I’m probably confusing the crap out of you so let me see if this example helps.

Let’s pretend I buy a house this year for $200K. Assuming a 5% home appreciation over 10 years my house will be worth $325K in 2019. Pretty sick that I made $125K without having to do anything. But let’s not forget our enemy inflation. Taking 3% inflation in to account it is more like a $57K gain over the ten years, still pretty sweet. But guess what. Ten years from now I’m still going to need a place to live. The $57K is just a paper gain, meaning it is intangible money (unless I took out a HELOC, which I will NEVER do!). The only way to actually have access to that $57K would be to sell my house. If I sold my house where am I going to live…in another house?

I guess in theory one could argue that you could downgrade in home as you get older to pocket the appreciation, but why the heck would I want to downgrade in life? As I get older I plan to UPGRADE. I know that home ownership can be a pretty sweet gig in the long term and it probably is an “investment”, but I am much more comfortable thinking of my home as a forced savings account so that I can eventually buy a bigger and better house. It made me really sad to see this couple on HGTV put all of their retirement hopes in the equity in their home. They are crazy and I don’t like it.

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