Recent data from Case-Shiller show that the long-run return on homeownership is low, and while some say consumers would be better off investing in equities, one expert says that conclusion is "wrongheaded" in a variety of ways.
For one thing, homeownership is a way for consumers to accrue wealth for retirement, particularly as wage growth has been stagnant for decades, MarketWatch reports. As well, owning a house is an important economic reserve in case of high medical and health insurance costs, and for those who need long-term in-home care. Bequeathing a property in a family is also a way to transfer wealth in the middle class.
Instead of talking people out of buying houses, we should be very concerned that Millennials, who were hit with student loans and a terrible job market as they got out of school, are not buying houses. They have essentially been forced to substitute student loan debt for mortgage debt.
All that said, an argument could be made that Americans overinvest in housing. The average square footage of new single family housing has been rising sharply, even as the number of people in the average household has declined.
Advertisement
Related Stories
Labor + Trade Relations
Residential Building Wages Rise Again in March
Wage growth for residential building workers continued during March, but at a slower pace than during the previous month
Economics
Housing Share of GDP in Q1 2024 Rises Above 16%
The increase marks the first time GDP has surpassed 16% since 2022
Economics
Shelter Costs Drive Inflation Higher Than Expected in January
January Consumer Price Index data show inflation increased more than anticipated as shelter costs continue to rise despite Federal Reserve policy tightening