Homeownership, said Nagel, \u201crepresents probably the most risk-free investment opportunity to build wealth due to the tax advantages,\u201d such as the mortgage interest and property tax deductions. \u201cIt\u2019s very powerful,\u201d he said.<\/p><\/blockquote>\n
The article then profiles some young \u2018uns who got burned by buying condos\/houses during the market run-up or its peak and lost value after the crash. \u00a0But it concludes, citing Brian McCabe, assistant sociology professor at Georgetown University<\/p>\n
\u201cThere aren\u2019t a lot of opportunities to build wealth outside of homeownership,\u201d said McCabe, \u201cand we rely on our wealth, this wealth that we\u2019ve built, for retirement, for weathering health emergencies, maybe sending our kids to college. And homeownership still remains the best way to build wealth.\u201d<\/p><\/blockquote>\n
Have we learned nothing?<\/em><\/p>\nPeople have been constantly pushed to buy homes, and to buy in the best neighborhood and at the most expensive pricepoint, they can \u201cafford\u201d \u2014 and \u201cafford\u201d generally has been taken to mean \u201cqualify for a mortgage for\u201d rather than \u201cincorporate into a sensible budget taking into account income, expenses, and savings needs\u201d \u2014 based on the expectation that housing values will rise continuously, and at a pace far eclipsing inflation. \u00a0And somehow we\u2019ve deluded ourselves into thinking that this is a good thing<\/em> \u2014 when it\u2019s really a disaster for everyone who doesn\u2019t own a home already, or is struggling to make their monthly payment.<\/p>\nThere are plenty of opportunities to build wealth outside of homeownership. \u00a0There\u2019s the 401(k) plan. \u00a0Mutual funds. \u00a0Heck, you can even buy a property and rent it out as a landlord.<\/p>\n
In fact, here\u2019s a little thought experiment:<\/p>\n
Say you own a house, but then discover that you need to relocate. \u00a0You could sell your house, and buy another one, or you could rent out your existing house, and rent a house in your new home.<\/p>\n
Which is the better choice? \u00a0If you know you\u2019ll need to repeat this process multiple times, you\u2019ll be dealing with real estate agents\u2019 commissions each time. \u00a0The deductions that one gets as a homeowner \u2014 mortgage interest, property tax, etc. \u2014 are also deductible from your taxes as business expenses. Some of the factors \u2014 the tax breaks for homeowners, for instance \u2014 are a matter of the government deciding to promote homeownership, not a \u201cnatural\u201d consequence of owning vs. buying. \u00a0And others \u2014 the difficulty of finding just the right house, or just the right tenant, in a market where few people rent single-family homes \u2014 are a consequence of the cultural belief that homeownership is better (and probably not the case if you own a condo, where there\u2019s a much larger market). \u00a0In addition, one of the expenses of renting out your home, if you\u2019re a long-distance landlord, is likely to be having a local property manager, and many of those expenses are things that you wouldn\u2019t really think of as a \u201ccost of owning a home\u201d in doing the \u201crent vs. buy\u201d math: \u00a0a landlord has to fix a leak, repair a light fixture, etc.<\/p>\n
And, by the way, I knew at least one person in Germany, when we lived there, who took this route \u2013 renting and landlording at the same time.<\/p>\n
Which means that what we\u2019re really talking about in terms of an \u201cintrinsic\u201d benefit is not \u201chomeownership\u201d as an investment, but real estate<\/em> as a form of investment. \u00a0And everything beyond that is the result of government policies which may or may not be wise.<\/p>\nYes, I know that the rationale for government policies, that people who own their own homes take more pride in them, and feel more attached to their communities and care more about the well-being of their neighbors. \u00a0But, especially with respect to the latter, is that really a result of homeownership, or a result of the culture we\u2019ve created in which long-time residents are expected\u00a0to purchase? \u00a0Besides which, we have this stigma of the absentee landlord who doesn\u2019t care about his tenants, and doesn\u2019t maintain properties in poor neighborhoods \u2014 but would a homeowner without any cash be any better able to manage needed repairs? \u00a0At least a landlord with multiple buildings should be able to manage the repairs needed as they arise over time, and can be legally compelled to ensure the property is habitable.<\/p>\n
So that\u2019s my grumpy vent for the day. \u00a0It almost makes my blood boil<\/a>. . .<\/p>\n\u00a0<\/p>\n
Image: \u00a0https:\/\/commons.wikimedia.org\/wiki\/File%3AAbernathy-Shaw_House_c.1908.jpg; By Brian K. Chatham (Own work) [CC BY-SA 3.0 (http:\/\/creativecommons.org\/licenses\/by-sa\/3.0)], via Wikimedia Commons<\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"
On Sunday, the Tribune featured an article on millennials choosing to rent rather than buy homes. \u00a0It was a bit fluffy, quoting as a \u201ctypical millennial\u201d a 24 year old who said he wanted to be a renter for life, so as to be able to \u201cpack up and go\u201d but didn\u2019t actually rent at […]<\/p>\n","protected":false},"author":2209,"featured_media":6692,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[302,646],"class_list":["post-6688","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","tag-homeownership","tag-investing"],"yoast_head":"\n
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<\/p>\n