Is home ownership a good idea for everyone?

[LivingAlmostLarge]

Nika I rent one of those suburban houses but I'm still glad I did. I am glad we didn't buy and make a mistake of buying in the wrong location. Is it wrong to rent even a suburban place? I think not. Because at the end of the day if we had bought in this location we'd be unhappy. So we are lucky we managed to rent and figure it out.

I think that even renting not perfect places has a lot of benefits that aren't measureable in monetary value.

Also glad DC has been good to your family. Enjoy it.

[danielaa]

Depends on your situation especially when you're alone, ownership is probably the last thing you'll think about. That's my opinion.

[james.hendrickson]

Q: Is it better to own or rent?

A: From a wealth building standpoint, it is better to own than rent.

Like a lot of you here on the forums, I like to make decisions based on good data. One of the best data sources for personal wealth in the United States is the Federal Reserve's Survey of Consumer Finance. It is a massive study which has good statistical properties and is designed to be broadly representative of the finances of the American population in general.

The Survey of Consumer Finance data shows very clearly that homeowners are much richer than renters. In fact, in 2013 homeowners had median net worths of $195,400 compared to just $5,400 for renters. I've attached the report so you can see the figures for yourself.

While it is true that homeowners on average have higher incomes than renters, ownership itself probably causes wealth. Why?

1. Real estate increases in value. While returns are often difficult to compare against stocks, most analyses show that the value of homes has increased in the past 50 years. This gives owners capital gains not available to renters.

2. Ownership is tax efficient. For example, mortgage interest is generally tax deductible as are real estate taxes. This is important as taxes are generally one of most Americans major expenses and these tax benefits are usually not available to renters.

3. Owners have more borrowing flexibility. Banks will issue home equity lines of credit or refinance loans on real estate. They typically do not the same for renters. This gives owners greater borrowing flexibility.

So, from a pure wealth building standpoint owners have the edge over renters.

[Dahlia]

What about passing property down to children? Wasn't that a big way to get peace of mind knowing the kids will be ok when you die- have a roof over their heads?

Or is that an outdated concept?

I live near some low income areas and many of the adults live in the house they were raised in. They couldn't afford to rent in this town, but they can afford to live in a paid off house.

[frugalninja]

What about passing property down to children? Wasn't that a big way to get peace of mind knowing the kids will be ok when you die- have a roof over their heads?

Or is that an outdated concept?

I live near some low income areas and many of the adults live in the house they were raised in. They couldn't afford to rent in this town, but they can afford to live in a paid off house.

That does seem to be an outdated concept though not necessarily a bad one, just seems to have fallen out of fashion in our culture, probably in part due to more people moving around the country now. Most people used to live their whole lives in the area where they were born, not so much today.