Home Ownership: Is the American Dream a Crock?
If owning a house is a big part of your idea of success, you’re not alone. For decades, homeownership has been sold to us as an important part of the American dream. We’re all supposed to want one.
But these days, buying a house isn’t as easy as it once was. And it’s not always such a great deal, either. Here are some myths we’ve been fed that may not be true across the board anymore, if they ever were.
When you pay off your home, you’re done paying
One of the arguments in the rent v. buy debate is that renting is just throwing money down the drain every month. When you buy, sure, you make a monthly payment toward your mortgage—but once you’re done, you’re done. And now you have a valuable asset.
But the truth is, you’re never really done paying with a home. Property taxes can rival your mortgage, depending on where you live. And if something expensive needs repairs—like your roof or your water heater—you could end up paying thousands.
With a rental, your rent and utilities are all you pay—and your landlord pays the other costs.
Homeownership is how you increase your wealth
The idea is that your home goes up in value. You buy it, live in it for a while, and then sell and reap the profit of rising housing costs. When so many people struggle to build up meaningful savings, home ownership seems like it's one sure way to do that.
But housing prices aren’t guaranteed to go up. During the housing bubble of 2008, the housing market crashed and suddenly homes were worth a lot less than people bought them for.
Millions of homeowners were suddenly “upside-down” on their mortgages—owing more than the home was worth. At the individual level, this can be a financial disaster.
So remember: your home isn’t guaranteed to be worth more than you bought it for when you sell it.
Homeownership is the smartest thing you can do with a large chunk of change
Let’s say you’ve done better than 50% of all Americans and you’ve actually managed to build up some savings. Is making a down payment on a house the smartest thing you could do with that money?
You could put it in a retirement account instead—where it could accumulate interest and deliver future stability. But let’s leave aside stocks and bonds for a minute and talk opportunity cost.
Would it make more sense to buy a house right now—or pay down your student loan debt? Or maybe even move to a city with more opportunity, where you could potentially land a job with a higher salary?
There are plenty of things you could do with accumulated savings to make your life more financially secure. Home ownership is one decision, but it’s not the only one—and not the best one for many people.
Buying a home is a smart decision for some people. It’s not for everyone, though, and it shouldn’t be sold as a blanket symbol of adulthood. Plenty of high-functioning, successful adults rent their whole lives.
Weigh the pros and cons for yourself—and come to a decision that makes sense for you.