I’ve long argued that people should view their homes as consumer goods, not as investments. If you make money on your home, that’s great. But most people don’t, especially after factoring in inflation and the costs of home ownership. This article points to a study that reaches the same conclusion. The authors say that home ownership is a good way for many people to save money and accumulate equity, but they likely are better off renting and investing if they want to maximize wealth.
The question of rent versus buy has been wildly popular during the housing recovery. The historic housing crash at the end of the last decade came as a bitter shock to millions of Americans, many of whom never considered that home values could fall at all or that they could fall as far as they did.
The U.S. homeownership rate is still hovering near its record low, yet buyer demand has been steadily rising. Construction, however, has not been rising quickly enough to meet that demand, resulting in fast-rising prices. In the last few years, prices have increased faster than income and inflation.