Homes Are Still Where Our Financial Hearts Are
Gallup’s Economy and Personal Finances poll asked Americans to choose the best option for long-term investments and they went with real estate, followed by gold, and then stocks and mutual funds (which should be the answer!), and then savings accounts and bonds. Lower-income Americans earning less than $30K were most likely to choose gold as a long-term investment.
At The Washington Post, Catherine Rampell says, “huh?”
The fact that Americans still financially fetishize homeownership baffles me. Never mind that so many people lost their shirts (among other possessions) in the recent housing bust. Over an even longer horizon, owning a home has not proved to be a terribly lucrative investment either. Don’t take my word for it; ask Robert Shiller, winner of the 2013 Nobel Prize in economics who previously became a household name for identifying the housing bubble.
“People forget that housing deteriorates over time. It goes out of style. There are new innovations that people want, different layouts of rooms,” he told me. “And technological progress keeps bringing the cost of construction down.” Meaning your worn, old-fashioned home is competing with new, relatively inexpensive ones.
Why do we love houses so much? Rampell says it may be that Americans like to invest in something tangible and our tax code nudges Americans into buying houses via things like the Home Mortgage Interest Deduction. Buying a house has also long been part of The American Dream, and it’s also nice to not have to deal with a landlord if you don’t have to (right, Meaghan?).
For me, investing in a home is about investing in roots — a place where you can build a life or a family or a safe space from the outside world. Building equity is secondary to that. I also have no interest in buying a house at the moment — though I do think about buying a summer house in the middle of the woods where I can escape to and there is no internet access and I could just read and write and lay on a hill somewhere and stare up at clouds.
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