Feature

Buying a home is no way to make money

Given the cuts looming over Social Security, here’s my advice: Forget the house and save for retirement, said Robert Bridges at The Wall Street Journal.

Robert Bridges
The Wall Street Journal

Homeownership “has never been a particularly stellar investment,” said Robert Bridges, and the sooner young people realize it, the better. Between 1980 and 2010, the median value of a single-family house in California rose from $99,550 to $296,820, or an average of 3.6 percent per year. If the buyer of that median house had opted in 1980 to put the 20 percent down payment of $19,910 in a Dow Jones Industrial Index fund instead, the value of his or her portfolio in 2010 would have been $1.8 million—$1.5 million more than the house. So “why is there such rapt attention to the revival of the homebuilding industry and residential property markets?” Because politicians crave economic recovery, and few activities have such “direct, intense, and immediate positive economic impact as new-home construction.” But that transitory macroeconomic bump doesn’t help young people, who “simply can’t afford” both mortgage payments and contributions to retirement accounts. Houses may be “part of a good life,” but they’re “not always good investments on the road to financial independence.” Given the cuts looming over Social Security, here’s my advice: Forget the house and save for retirement.

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