Managing the Best Financial Asset

by R. Ricks


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Abstract

Home ownership is an excellent investment for most people. The author claims that it is the best financial asset of most households. More information and training should be made available to assist purchasers in evaluating the purchase decision and purchasers should concentrate more on the investment aspects of the decision. The results detailed herein are not automatic. They are also not unusual. Home purchasers need to concentrate more than they now do on analyzing expected future price changes of the housing, since it has such a profound effect on their personal wealth. There is too much emphasis on monthly cash costs of home ownership and too little focus on tax deductions and equity change. Public policy should encourage home ownership because it increases national wealth, the value of the nation's housing inventory. If home ownership is a good investment in the portfolios of individual households and if it leads to maintenance and improvement of the nation's wealth of its housing invented, then how can public policy encourage home ownership? It has been demonstrated that the deductibility of interest and property tax and deferral of gains helps considerably. Deductibility of maintenance and improvement would help, particularly if related to natural resource conservation, such as insulation to reduce electricity and natural gas consumption.

California Management Review

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