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506: Home Investment

Would you buy a house? Why or why not?


Full episode script

In February of 2018, reports said that that 38 percent of all U.S. single-family home purchases in 2017 were made by first-time homebuyers, the biggest share since 2000. Who exactly constitutes those first-time homebuyers is a larger question. Reports from about this time last year, compiled based on 2016 data, found that the vast majority of first-time homebuyers were married with no children, born in the USA, and white.

So-called conventional wisdom used to be that buying a home was a good investment. Even in the depths of the housing crisis, this was the case. In 2014, writing for the Washington Post, Catherine Rampell wrote:

Gallup asked Americans this month to choose the best “long-term investment.” Real estate was the most common pick, ahead of mutual funds, bonds and other options. Similarly, Fannie Mae’s National Housing Survey asked Americans to assess whether various kinds of assets amounted to a “safe investment with a lot of potential.” As has been the case since before the financial crisis, “buying a home” beat out all the alternatives.

Yet, that belief may not always be backed up by data. Continuing to quote from that same article:

Over the past century, housing prices have grown at a compound annual rate of just 0.3 percent once one adjusts for inflation, according to my calculations using Shiller’s historical housing data. Over the same period, the Standard & Poor’s 500-stock index has had comparable annual returns of about 6.5 percent.

Yet there are also a good number of arguments for buying a house – it’s a way of sitting outside the shifting prices of rental locations, a way of solidifying living in a school zone or near a workplace, and a way of having a lot more control over the place that you live. But that doesn’t mean it’s accessible to everyone, or always a good choice. So what choice are you making?

This script may vary from the actual episode transcript.