Americans Are Way Too Eager to Buy Houses
Houses aren't great long-term investments, Catherine Rampell argues.
By Kevin Spak, Newser User
Posted Apr 22, 2014 12:35 PM CDT
In this Aug. 22, 2011, file photo, a sold sign is posted in front of a new home in Springfield, Ill.   (AP Photo/Seth Perlman)

(Newser) – Last week, Gallup released a poll showing that Americans, in Catherine Rampell's words, "still financially fetishize homeownership." Despite the financial crisis, respondents still considered real estate the best long-term investment—which "baffles" Rampell because, by her calculations, home prices have risen at a compound rate of 0.3% per year over the past century, compared to 6.5% for the S&P 500, she writes at the Washington Post. "Yet Americans still think it's financially savvy to dump all their savings into a single, large, highly illiquid asset."

Egged on by tax incentives, Americans consider homeownership part of the American dream, romanticizing "the idea of owning their own roof, walls, and fireplace," and confusing those psychological benefits for financial ones. They forget that houses deteriorate over time, even as technological advancements make building new ones cheaper. "Meaning your worn, old-fashioned home is competing with new, relatively inexpensive ones." As the Senate considers winding down Fannie Mae and Freddie Mac, many will complain that it makes homeownership less affordable. Maybe it should be. Click for her full column.

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jgarbuz
Apr 26, 2014 6:20 PM CDT
Well, when my parents, immigrants, finally bought their house in 1960 it was all brick two family and they had to put down $10,000 on the $34,000 or about 30% to get a 30 year mortgage on the rest of the $24,000. But this easy credit that the government has encouraged since those early days is a main reason why there is so much debt and misery. I understand it was done to create jobs in construction as well as to encourage the real estate speculators which goes back long before the founding of the Republic. However this easy credit is to fool people into putting in a little money and then taking back the house an fleecing the suckers later on when they can't pay the ballooning mortgage payments. This easy credit was really all about fleecing suckers which is why the so-called " middle class" went bust in 2009 and will again, and again, and again because in America, as P.T. Barnum's critic said long ago, "A sucker is born every minute."
NorCalHal
Apr 24, 2014 8:48 PM CDT
Not sure where Catherine Rampell got her training but I learned a long time ago the secret of making money is OPM (not Opium) but Other People's Money. Any time you can leverage your money in a fairly stable and secure investment you will make MORE money! Assume you have $ 10,000 to invest. You can put the 10 G in the S&P 500 and like she says get 6.5% or $ 650 back at the end of the year. When you file your tax return you may have to report and pay taxes on the interest or dividends, depending in what you invested your money. OR, you can buy a $ 100,000 house with 10% down (your $ 10,000) and at the end of the year it has appreciated $ 300 AND you have either had a place in which to live or rental income AND you have tax deductions versus tax liabilities.... Ms Rampell can do what she wants but when real estate often appreciates 10% or more a year, I can leverage my money (use OPM) and get tax deductions and possibly income it's a no brainer for me. Investing in real estate is the program I used and retire "comfortably" at age 50.... not dependent on social security, welfare, employer's retirement. etc...
Bill Sherman
Apr 23, 2014 7:54 AM CDT
EQUITY! the biggest reason to own a home. why pay a landlord when you can bank that rent? right now, hedge funds ar buying houses left and right and renting them and causing the cost of housing to increase.