Report: Buying a home has become a better deal in every state except IL, MI and NJ

September 18, 2018

Across the nation, low interest rates and rising home values have made owning a home a better investment today than a decade ago. However, in three states owning a home is a worse deal today than it was prior to the housing bubble. These findings come from a new report released today by the Illinois Policy Institute.

The report, “House hunters: Why a home is becoming a more attractive investment across the U.S.,” explains that the costs of maintaining a home in Illinois, New Jersey and Michigan are growing much faster than the value of homes in these states. Ultimately, homeowners in these three states have seen a decline in their return on investment.

In every other state, homeowners are seeing a better return on investment on their homes over time. Nationwide, the total cost of homeownership as a share of home value has declined by 19 percent since the pre-housing bubble period.

“The decision to own a home in Illinois, New Jersey and Michigan is becoming a worse investment. If you want to sell your home, it will become harder. If you want to stay in your home, it will become more expensive, and your home value won’t keep pace with the growth in your costs,” said Orphe Divounguy, chief economist at the Illinois Policy Institute. “Buying a home in other states looks like a more attractive investment.”

The three states that saw a decline in homeownership ROI:

  • Illinois. In the past decade, Illinois experienced a 38 percent property tax hike and a 19 percent income tax hike, which reduces the benefit of deducting mortgage interest and property taxes from federal and state income taxes.
  • Michigan. While home values rose nationwide, home values in Michigan fell 14 percent, which meant homeowners felt the pain of increases in maintenance costs and property taxes more acutely.
  • New Jersey. Steep property tax hikes and the nation’s largest increase in maintenance costs have led New Jersey to experience the largest increase in the cost of homeownership in the nation. This could not even be offset by declines in effective income tax rates or home price appreciation.

The three states that saw the greatest increase in homeownership ROI:

  • Montana. Rapid home price appreciation, with home values increasing 59 percent, has led to the cost of homeownership declining by 34 percent. Montanans have also benefited from one of the nation’s largest reductions in property taxes, with effective property tax rates declining 20 as percent
  • California. Homeowners have benefited primarily from lower interest rates and home price appreciation of 16 percent. Meanwhile, income taxes have decreased by 2 percent and the effective property tax remains among the lowest in the nation, despite a slight increase in property taxes.
  • Hawaii. Home values have experienced astronomical growth in Hawaii, increasing 60 percent in the past decade, leading to the greatest reduction in the cost of homeownership in the nation, a 51 percent decline. In addition, Hawaii residents benefited a 40 percent decline in the effective income tax rate.

To read the full report, visit