Nearly half no longer think owning a home is a realistic tool to build wealth

[jeffrey]

The long-held belief (some call it a myth) that homeownership is a sure-fire ticket to building wealth and equity might be changing, according to a recent survey from the National Foundation for Credit Counseling.

Nearly half of those surveyed no longer think owning a home is a realistic tool to build wealth...

Survey Reveals Shifting Attitudes Toward Homeownership - Developments - WSJ

[disneysteve]

Well, I've never thought that, so I guess I was ahead of my time.

[poundwise]

That people are overly optimistic during good times and overly pessimistic during bad times is no surprise. Too many people are tossed around by every wind of change and wave of uncertainty and latch on a bit of information that they 'heard' somewhere as a basis for their conclusions.

[kork13]

While I probably agree that (unless you intentionally work to profit off of it) a home(s) is not good for building wealth, I do think that it's good for building security. Minor difference, but a significant one, IMO. Owning an affordable home allows you to establish yourself in a location, and in 20-30 years (or less), you'll have a home that you own outright.

[Joan.of.the.Arch]

Heh, heh, Poundwise, you made me think, "I guess I just hang on solidly to my unrelenting pessimism which leads me to having a pretty good present and probably a decent future". So I'm the happy pessimist.

Leaving a paid-for house to your surviving children helps raise their level of wealth after it has provided a place for you to live.

[disneysteve]

I have no doubt that we would be financially better off today if we had been renting for the past 15 years instead of owning. We wouldn't have built equity in our property but we also wouldn't have spent tens of thousands for a new roof, windows, central air, heater, water heater, numerous appliances, various repairs, repaving the driveway, removing and pruning trees, new siding and gutters and more. All of that money could, instead, have been padding our investment accounts.

I think the whole "home ownership to build wealth" idea is a crock.

[GREENBACK]

Originally Posted by disneysteve

I have no doubt that we would be financially better off today if we had been renting for the past 15 years instead of owning. We wouldn't have built equity in our property but we also wouldn't have spent tens of thousands for a new roof, windows, central air, heater, water heater, numerous appliances, various repairs, repaving the driveway, removing and pruning trees, new siding and gutters and more. All of that money could, instead, have been padding our investment accounts.

I think the whole "home ownership to build wealth" idea is a crock.

I totally agree. I remember renting and saving up to put my 20% down which I did. Everyone was telling me about the "financial advantages" of home ownership. After making my down payment and spending to get the house the way I wanted it I had put a huge dent in those savings. I still don't know what they were talking about. There are certainly advantages to home ownership that go beyond the financial aspects but I certainly feel like I would have far more money today if I rented.

[disneysteve]

I didn't even mention the $580/mth for property taxes, money for insurance, etc.

[Daylily]

Originally Posted by disneysteve

I didn't even mention the $580/mth for property taxes, money for insurance, etc.

Those items would be factored into the amount of rent you would pay if you were renting.

My house is not a way for me to build wealth directly, but when it is paid off it is something I won't have to pay for any longer (aside from that laundry list of maintenance and repairs). When it is paid off, I can divert that money to savings/retirement or we can consider going to one-income or lower-income jobs. I'd be able to return to teaching, for example, rather than sitting in the corporate cube-farm earning a higher salary.

[red92s]

So I guess this means over half still DO think a home is a wealth-building tool?

[LivingAlmostLarge]

Daylily you can rent for less than owning. It's sort of difficult to find places that rents are more than the homes where I think steve and I live.

But I own because I like having dogs.

Yeah we bought a condo to get a dog. We liked having pets. BUT it certainly wasn't a wise financial move. BUT there were emotional considerations.

Now I hate my neighbors. We'll likely buy at our next place so we can stay put. BUT if we can't afford a SFH we're renting an SFH finally. Baby steps! Condo, townhouse, and one day a SFH.

[GREENBACK]

Originally Posted by LivingAlmostLarge

But I own because I like having dogs.

I'm in the same boat on that one.

[MonkeyMama]

Originally Posted by red92s

So I guess this means over half still DO think a home is a wealth-building tool?

YES!

I think this becomes a regional question. & I believe it is a wealth-building tool, in certain regions, for the LONG TERM. People tend to think so short term.

LEt me put it this way, our Grandma sold her home in 2001 and has a pleasure of renting a low-end "closet" (with maid service and food included) for $30k per year. (This is all she could afford and it is not "nice" in the least - the only thing that is nice about it is it is on the right side of the tracks). She had a small, manageable home that cost only $2k per year in insurance and property taxes. Property taxes legally can not rise more than 2% per year where she lives. Throw in a few thousand a year for maintenance (on a well-maintained property). Um, she would be better off owning, for sure. BUT she pays for her massive rents with the massive equity she earned over the years. She could also, obviously, move about anywhere else and get much more reasonable rents. Which she will have to if she lives another 10 years.

On the flip side, if I lived anywhere where rent was significantly cheaper than owning - I would have no idea why people would own. I'd rent in a heartbeat if it didn't cost an arm and a leg (my perspective).

We expect more benefits when our home is paid, but for us, owning has paid off since day 1. Rents are just absurd here. In addition, the rental market is VERY volatile here. I don't know anyone who has been able to rent a home for more than a few years (landlords either were flipping in the past, or now all going into foreclosure). I have a number of friends who rent SFHs and move every year - NOT by choice. I'd certainly pay a premium to be able to stay in one place!

[simpleyme]

as with everything it just depends doesn't it?
I bought my first home at 18 so I only rented for 2 years of my life,and bought at a time I did not know how to really save so any money that had not built up as equity would have been spent

as a landlord I can tell you that you do in fact pay property tax and insurance and repairs if you rent ;-) at the end of the year I always come out ahead on my houses, maybe its just what I bought how I bought and how I manage them

when you own a home and live in it you will spend more on repair and mantainance than if you were renting the same house out

[jIM_Ohio]

A house accumulates wealth. Each payment a person makes to the bank increases their net worth slightly. In that regard wealth is being accumulated.

Tapping that wealth is another issue. And whether it is a good place/investment vehicle to accumulate wealth is another issue.

My take anyway

[disneysteve]

Originally Posted by jIM_Ohio

A house accumulates wealth. Each payment a person makes to the bank increases their net worth slightly. In that regard wealth is being accumulated.

But Jim, that is only true because each payment decreases the outstanding debt a bit. If you didn't have that huge mortgage in the first place, that wouldn't apply.

[GREENBACK]

The other factor, as mentioned before, is the cost of owning a home. I can easily think of several thousands of dollars I've spent on my home that a renter never would have so the accumulated wealth is severely reduced with this factor. This is money that could have potentially been invested in something that would have caused it to be an even higher amount.

[ValL]

I'm not surprised with that survey. My partner and I were recently considering buying a house now that prices have dropped but are just re-evaluating the whole idea of whether or not it's the best thing to do financially. The problem of course is that at the moment interest rates are so low our money wouldn't be earning much interest anywhere else.

[jIM_Ohio]

Originally Posted by disneysteve

But Jim, that is only true because each payment decreases the outstanding debt a bit. If you didn't have that huge mortgage in the first place, that wouldn't apply.

DS- if the house is fully paid for it is an asset, which can still accumulate wealth.

It is not a steady accumulator of wealth, it is not a reliable accumulator of wealth, but bottom line is that the house (and more importantly the land it is built on) has value and that value can represent either past accumulation of wealth or future wealth if it is ever sold.

[disneysteve]

Originally Posted by jIM_Ohio

DS- if the house is fully paid for it is an asset, which can still accumulate wealth.

It is not a steady accumulator of wealth, it is not a reliable accumulator of wealth, but bottom line is that the house (and more importantly the land it is built on) has value and that value can represent either past accumulation of wealth or future wealth if it is ever sold.

I agree that it is an assets. Any tangible item that has monetary value is an asset. Building wealth is another issue, though. There are millions of people right now who would argue that owning a home has not helped them build wealth because the value of their homes has fallen 30 or 40 or 50% from what they paid and is now far below what they owe.