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Is Homeownership a Good Investment?

January 19, 2019 | Andrew Swain Andrew Swain

Homeownership is often seen as an investment and is a huge part of the American Dream. Owning a home represents having a place to call your own and a way to build generational wealth. While homeownership can be advantageous and a good investment in some cases, not everyone thinks it’s a great investment. According to a recent survey by RedFin, more than half (52%) of people ages 35-44 think the stock market is a better investment than real estate.

Looking at the numbers

In RedFin’s study, every age group except people ages 35-44 thought real estate was a better long-term investment than the stock market.

As you can see in the image above, 52 percent of people in the 35-44 age bracket thought the stock market was a better long-term investment than buying a house. This is a dramatically different view from those who are 55-64, with 62 percent of this group thinking real estate is the superior investment.

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The stock market constantly fluctuates so it’s not surprising that many people prefer real estate to the stock market. But why does one age group represent such an outlier in terms of how they view real estate as an investment?

A look at the Great Recession

What sets this age group apart is their experience with the Great Recession. In 2008, the housing bubble burst and had a ripple effect across many industries. Nearly everyone felt the impact of the recession in some way, but this age group was a bit different.

According to the RedFin article on the study, “the oldest Millennials and youngest Gen-Xers entered their late twenties or early thirties during the housing crash.” This, said Redfin chief economist Daryl Fairweather, explains why they are more skeptical than other age groups about investing in real estate.

Younger millennials ages 25-34 have a more favorable opinion of homeownership as an investment with 57 percent thinking it’s better than the stock market. This reflects the possible fact that they reached their prime first-time buyer years after the recession had already ended and house prices started appreciated again.

What’s fascinating about this study is that the survey respondents were targeted as people who indicated they bought or sold a home in the past year or were trying to do so. Given this information, it seems like there would be a predetermined interest in real estate.

However, looking at the housing market, temperatures have been up and down recently. Not only that, but the rise in student loan debt is hampering homeownership among younger demographics. According to the Federal Reserve, student loan debt prevented 400,000 people from owning a home.

So when it comes to homeownership as an investment, especially with all the extra costs and responsibilities, it may not be ideal for many.

What you can do

Long-term investments are supposed to help you build wealth over time. If you’re a homeowner and part of the 35-44 age group that believes the stock market is a better investment, you should consider selling your home and investing more.

If the housing market cools, it could be harder to sell your home and turn a profit. It can be a lengthy process with realtor fees and even more money to get it market ready.

If you’re looking for some cash and don’t want to make it such a laborious process, you can consider working with Sundae.

We buy homes as-is for the best price and can offer $10,000 in cash advances to help you transition to a new place. Our work is done at a large scale which helps us take less profit and offer a higher price, keeping the consumer in mind. If you have questions, get in touch with us to learn more.

Further reading: How to Sell a House That Needs Work

Bottom line

Whether you’re in the “real estate is better” camp or the stock market camp, the key to financial success is to diversify your investments and manage your money in a way that works for your needs. Continue to save and invest, to help you build wealth and financial freedom over time.

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Is Your Home Your Secret Retirement Savings?

Retirement is a long-term financial goal but if you don’t have a ton of time on your side or you’re already retired and need more cash, selling your home can make sense. It’s a big decision that should be made carefully but if you go this route, there are options like Sundae that can help you make the most of the situation.