Limited options for building wealth for those who cannot achieve homeownership

In an article examining building wealth through homeownership, there seem to be limited alternatives:

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Herbert says there are ways for renters to build wealth outside of home ownership, and he points to stocks and bonds as one example. In some cases, this may be a better investment than housing, he says.

“Renters can do well if they are able to put money into those financial instruments. The rate of return on stocks and bonds over the long term has certainly been higher than the rate of return on homeownership,” he says.

Still, Herbert is optimistic the housing market will improve in 2023 for those who want to go that route.

There are other investment options but this article does not expand much on them. The focus instead is on homeownership and the lengths people might go to achieve it or the ways opportunities might be expanded to more people.

One aspect of the article that struck me was the emotional component of status and success regarding homeownership. Owning a home and/or having a mortgage is not just a financial transaction that will likely pay off one day. It also involves providing for household members, signaling success, and joining a particular social class. It is hard to separate the financial investment and the emotional investment in American society.

Is the key then to promoting other investments or celebrating renting to successfully develop positive connotations and feelings? What if renting was viewed as a flexible form of provision that allowed households the nimbleness needed in today’s uncertain world? or, is investing in stocks and bonds an honorable investment in the future?

Finally, wealth and homeownership do not necessarily have to go together. New structures or systems might decouple this connection or provide multiple pathways to economic success.

2 thoughts on “Limited options for building wealth for those who cannot achieve homeownership

  1. Especially for people starting from near 0, the rate of return argument of stocks over homes is not very compelling, since the return on a home is at the purchase price, not the equity.

    Pretend you have a $200k home, and put down $20k. In a year, say the home appreciates 5% (ignoring other accumulated principal and various fees). You now have $30k in equity in the home.

    Compare that with sinking the $20k into stocks, with 10% return you have $22k equity.

    Like

  2. Pingback: Fights between suburban neighbors turn more rancorous, according to lawyers | Legally Sociable

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