“Owning a House Matters”
An article on the financial well-being of becoming a homeowner
This shows over a 30-to-1 net-worth advantage in favor of homeowners. Anticipating the sharp readers who will argue that this could be demographics (e.g., older people, more educated people, families, or high-income people are more likely to own houses), I looked further. Households headed by folks under age 35 have a median net worth that’s about double the $5,100 median net worth of non-homeowners. Households headed by folks with no high school diploma have saved more than triple what the non-homeowner has. So have single folks with no children. And, yes, even families in the bottom 20% of income have more net worth than the non-homeowner.
Pretty darn stunning.
We can speculate on why this is. I subscribe to the simple, classic argument in favor of homeownership. Each month, homeowners are automatically squirreling away the principal portion of their mortgage payment — as opposed to the renter, whose whole rent is an expense. People sometimes forget that the alternative to a mortgage is paying rent (not investing in the stock market) when they argue that home prices barely keep up with inflation.
As for the hidden costs of homeownership, I think a greater percentage of us than we’d like to admit end up blowing the money anyway — on fancier vacations, or extra glasses of wine on nights out, or living in a more upscale house or neighborhood, or shoes, or playoff tickets, or whatever it is that keeps our median net worth at just $77,300.
Don’t misunderstand me. This isn’t a call to arms for everyone to jump willy-nilly into one of the biggest, most complicated financial decisions of their lives. The harrowing stories from the housing bubble showed us what happens when we buy when we don’t have enough income or savings, overpay, or don’t do our due diligence. There are also non-financial reasons that buying a house just doesn’t make sense for some people.
And nothing I’ve written should be interpreted as a justification to buy that expensive rug instead of putting a little extra into your 401(k).
This is just a reminder that there are many theories on the other side, but the real-world numbers greatly favor buying versus renting when all else is anywhere close to equal.