Your home is not an investment, it is a liability. I’ve said it many times, and my real estate mentors have preached it for years. Still, the national obsession to be a homeowner continues.
Perhaps perceptions are finally changing. A new article by Conor Dougherty in the New York Times outlines a thought experiment that challenges our national obsession.
“The point of this thought experiment isn’t to embrace it full-on, but to open our eyes to the negatives of the national obsession of owning a home, expecting its value to rise, and using the levers of local government to keep neighborhoods as they are.”Dougherty points out that our lust for home ownership contributes to economic stress. For example, if the cost of food rises, we see that as problem for families. Yet when housing prices rise, we call it a “recovery,” even though that means fewer people can afford to buy a home.
Something is wrong when we encourage people to fulfill the American Dream while this nation’s economic cycles push it out of reach.
This issue is not only about home ownership or renting shelter. It affects migration from rural and suburban areas to cities, where more jobs with better pay exist. If you can’t afford a decent place to live in Dallas or New York City you can’t move there to improve your quality of life. It makes no sense, and yet this is what Americans are forced to accept.
Single-family Obsession vs. Multifamily Wealth
My goal is not to stop you from having a home. Rather, I’d like you to realize how the national obsession may be robbing you of better opportunities.
Freedom in the Black teaches the virtues of passive income for those investors who own commercial real estate—apartment complexes, light industrial sites and storage facilities. This is how you build wealth. Owning a single-family home is not an asset that continually puts money in your bank account. The opposite is true.
Instead of saving for years to purchase a home, what if that money could be invested on hard assets that deliver monthly streams of income? More Americans would be better off as their net worth grows. Many people are blind to this approach because, or rather, blinded by our national obsession to own a single-family home. A home that may or may not accrue value through the years.
How Much Should A Home Cost?
Dougherty’s thought experiment is based on a new paper by economists Ed Glaeser of Harvard and Joe Gyourko at the Wharton School of the University of Pennsylvania. The authors’ goal using construction industry data was to determine how much a house should cost if cutbacks in land-use regulations were put in place.
The cost of building a home does not vary much. It’s the cost of the land that creates wild real estate prices in cities like Boston and San Francisco. In those markets, some new regulations would cause home prices to drop dramatically, whereas modest price drops would happen elsewhere, Dougherty surmises.
Meanwhile, lower home prices would allow people to move more often and greater distances to seek better jobs. How many people do you know who have been trapped in their single-family home because they couldn’t find a buyer? Or they could find a buyer but their property values declined?
Put a price on mobility and its advantages and you’ll see quality of American life generally improve.
Make A Change Now
Dougherty’s ideas are very interesting, and, in my opinion, well worth exploring. But when will changes of the type he describes happen?
The faster way to seize the opportunities illuminated in this article is to change your own thinking about debt and home ownership.
In fact, if as a nation, we decided to drop the obsession for a year or two and explore other options, perhaps the market would notice and begin to adjust to our consumer habits.
If we’re no longer frantic about buying a home, discussions about design and environment might replace the emphasis on loan applications.
And if we were truly mobile and could find work that increased our salaries, we might be wise enough to start investing in the kind of real estate that provides passive income every month.
Owning a home is a gamble that may or may not pay off in years to come. Don’t wait. Do something smart with your investment dollars today. Drop the home ownership obsession for a plan that is evidence-based and powerful. You’ll be better off, and so will America.
P.S. My new book The Passive Income Physician—available soon—illuminates some of these same issues.
Our obsession with home ownership blinds us to so many other ways of building wealth.
If you are fortunate to have a high-end income,
my book will help you see beyond the myths and find satisfaction in new ideas.