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Is buying a house a good investment?

To find out, we asked over 1,000 Americans (Survey)

is a house actually a good investment header graphic

With so many swarming to the homebuying process, it’s easy to assume a house — a key component of the American dream — is a great investment. But is this true today?

To look into this question, we conducted a survey of 1,146 homeowners and renters in the U.S. They shared their experiences and takes on owning a home, including whether homeownership was actually a good investment. Homeowners shared what they earn (financially and emotionally) from each property, and renters explained their rationale for taking another path.

If you’ve been thinking about jumping into homeownership but want to reflect with us first, keep reading to see what we found.

Highlights

  • 63% of Gen Z would rather own a home than rent.
  • 40% of people thought crypto is a better investment than a home.
  • 44% of homebuyers paid over their original budget, spending an average of $10,334 more.
  • 73% of Americans reported higher self-esteem due to owning a home.

Renting vs. owning preferences in 2022

The study begins with a simple pulse check: Would you rather own or rent a home today? We also asked if people considered homeownership a smart investment or a waste of money. Responses were then compared by generation.

graphic depicting who would rather own a home than rent

For the vast majority of Americans we surveyed, homeownership remains the dream — or, at least, preferable to renting. Seventy-one percent of respondents agreed they would rather own than rent and anticipated that they’d do so by the age of 35. That said, first-time buyers are having trouble securing a home today for a variety of reasons, including buyer competition, a lack of affordable properties and lightning-fast sales. Baby boomers were particularly in favor of owning over renting — only 15% of this generation preferred to rent.

Fifty-six percent of respondents agreed that renting in this market was a complete waste of money. While “waste” seems like a strong word, the argument is supported by the fact that rents are exploding across the country, with the median rent rising 19.3% from 2020 to 2021 alone.

Gen Z was the most likely to think owning a home in the current market was a bad investment. Though they’re the youngest participants in this study, many seasoned financial investors agree: Bloomberg recently reported that multiple predictions suggest we’re soon headed for a housing crash. Experts aside, the next piece of our study looks into the general population’s perception of why homeownership might not be a good investment.

Reasons to avoid real estate

For years homeownership has been seen as a solid investment, but buying a home isn’t for everyone. We considered the viewpoints of those not currently invested in or looking to invest in a home and what investments they prioritize.

graphic depicting top reasons people aren't investing in homes

While the most common reason for not owning a home was affordability (39%), a potential bust of the real estate market could easily change this statistic. And a substantial number of Americans still prefer renting, even during historically high rent hikes. Twenty-nine percent found the flexibility of renting agreeable, which may be particularly valuable during the age of remote work; 26% said renting simply feels easier.

Half of respondents thought stock market picks were better investments than homes. Forty percent said the same thing about cryptocurrencies, while 32% preferred that their cash go to NFTs. Men were especially keen on investing in NFTs in lieu of homeownership.

How housing costs add up for owners

Digging further into some of the details of homeownership, we asked respondents who already owned at least one home about how much they went over budget and what they have to spend the most on every year to maintain their residence(s).

graphic depicting the costs of homeownership

Going over budget was not at all uncommon, even before the current real estate boom. Nearly half of respondents admitted to spending over their personal budgets, exceeding their plans by $10,334 on average. Millennials were even more likely to go over budget — and by a larger amount: $11,780.

In all likelihood, the average over-budget spending is likely to increase. Housing prices in some of the nation’s most popular markets are objectively overpriced, according to some experts.

But it wasn’t just the asking price that made homeowners spend more than they anticipated. The unexpected costs, like property tax, add up. Property tax is a guaranteed payment in perpetuity determined by the value of the residence and neighborhood. It’s likely to increase as real estate markets boom nationwide.

Currently, the nationwide average property tax rate is 1.1% of a home’s assessed value. This doesn’t include homeowners association (HOA) fees, which 7% of homeowners agreed was one of the most expensive parts of owning a home.

Other reasons for owning (or avoiding) real estate

We’ve dug heavily into the reasons to avoid real estate, but clearly many people are flocking to the market with good motivations for doing so. This last piece of our study looks into the financial rewards homeowners are earning for each of their properties as well as the psychological benefits they’re noticing.

graphic depicting the rewards of homeownership

In addition to the obvious (potential) financial benefit of homeownership, the vast majority of homeowners surveyed expressed an increase in their self-esteem. They said owning a home made them feel independent (67%), satisfied (64%) and proud (61%).

Though there are many psychological benefits that come with homeownership, there are still some challenges. Nearly a third of homeowners described their status as “stressed,” while 17% said they were frustrated.

Ultimately, though, many in this study were actively getting these investments to work for them, often earning upward of $25,000 annually on average. That said, there was a diminishing rate of return for each additional investment property, with two homes bringing in an average of $24,382 and three homes making just about $1,300 more.

Is homeownership part of your American dream?

Homeownership clearly isn’t right for everyone, and this particularly bullish real estate market had many respondents quick to notice the downsides. Recent buyers often overpaid and spent more than expected on property taxes. Still, the vast majority of respondents want to own a home, and those who already did expressed many positive psychological and financial benefits.

Our takeaway: Homeownership is ultimately a personal choice, and maybe it’s not as integral to the American dream as it once was.

Methodology and limitations

We surveyed 1,146 Americans about their homeownership status and experience. The margin of error was +/- 3% with a 95% confidence level. The data we present rely on self-reporting.

Fair use statement

Did this research influence or inform your feelings regarding owning a home? You’re welcome to share this data with anyone you think might find it beneficial; just be sure you link back to this page and that your purposes are noncommercial.

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