WaPo columnist: Home ownership is a lousy investment

posted at 8:01 am on April 23, 2014 by Ed Morrissey

Most people include home ownership as one of the basic elements of the American Dream. It stands not just for independence, but also in most minds an investment in tangible and significant property. It’s not a universally-held goal — some people prefer to rent even with the means to own — but home ownership is usually seen as one of the building blocks to middle-class wealth.

As I noted, some people prefer to avoid home ownership, but not usually on the basis of it being a lousy investment. See if you can pick out the huge, gaping flaw that the Washington Post’s editors apparently missed in Catherine Rampell’s column:

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.

Over the past century, housing prices have grown at a compound annual rate of just 0.3 percent once one adjusts for inflation, according to my calculations using Shiller’s historical housing data. Over the same period, the Standard & Poor’s 500-stock index has had comparable annual returns of about 6.5 percent.

Yet Americans still think it’s financially savvy to dump all their savings into a single, large, highly illiquid asset.

Perhaps it helps to identify the one word that Rampell never includes in this essay … rent. The primary home is not just “a single, large, highly illiquid asset”; it’s where people live, too. If they don’t have a house to own, they will have to pay rent.

For instance, I’ve owned my current house for a little over sixteen years, and it’s the longest I’ve ever lived in one place. I’ve paid between $1,050-$1,125 each month for my “investment,” and the rents in my community for even a somewhat-smaller place run at least that amount (according to Zillow). Either way, I’d have paid roughly $211,200 for a place to live. However, I had the choice to sink that cash into either a property in which a significant amount cash would be recoverable in a sale (equity), or handing it all over to a landlord with no return on it whatsoever.

Which is the better investment? Even if I could squeeze into a smaller space (2 bedrooms), I’d only have saved about $200 a month, or roughly $38,000 overall. In sixteen years, my equity has increased by about three times that amount, even with the housing bubble and crash a few years ago. I didn’t just go out and burn $172,800 by handing it to another property owner without a stake in the property for myself.  This may not turn out to be the best investment I’ve ever made in terms of pure cash return, but it’s saved me at least the $172,800 I would have spent without any return at all — which in real terms makes it the best possible investment I could have made.

Now, this may not be the biggest issue in the public square at the moment, but Rampell’s argument had to go through the “layers of fact-checkers and editors” we hear exist at journalistic outlets such as the Post. Yet no one apparently knew enough about the concept of “rent” and “opportunity cost” to flag the column and ask Rampell to address the gaping hole in her argument. Odd, and it suggests that the people involved aren’t terribly well acquainted with economic reality.

Update: Jim Geraghty suggests other ways to get government out of subsidizing the American Dream. Also, Rampell’s point about scaling back or ending government policies that incentivize home ownership actually works better by underscoring what a great “investment” primary home ownership actually is. Why do we need to incentivize it when the opportunity costs already do so as strongly as they do?

Update: Great discussion in the comments. I’ll only add one more point in the post itself. Most people have the choice to own or rent their living space (the others will either inherit or live with relatives). The choice is, respectively, to put money into your own real-estate investment or into someone else’s. Absent the need to be mobile and assuming one is capitalized enough to afford a rational down payment on a rationally-priced home, why would the latter be a better choice in terms of investment?


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It’s not a bad investment if you have a CAREER and intend to LIVE THERE.

What caused the market to go crazy insane was this idea of people “flipping” houses they bought in a form of ponzi scheme that worked like musical chairs, AND the usual use of force by the government to loan money to people who couldn’t POSSIBLY ever pay the loans back.

ConstantineXI on April 23, 2014 at 8:05 AM

D’oh

cmsinaz on April 23, 2014 at 8:07 AM

Yet no one apparently knew enough about the concept of “rent” and “opportunity cost” to flag the column and ask Rampell to address the gaping hole in her argument. Odd, and it suggests that the people involved aren’t terribly well acquainted with economic reality.

What you see as a bug, the WaPo views as a feature. When the collective bans private ownership of homes, well Rampell’s discussion will be spot on.

Happy Nomad on April 23, 2014 at 8:09 AM

Too many people buy when they should rent for a while, but yes, responsible home ownership eventually wins the day.

22044 on April 23, 2014 at 8:09 AM

Just more of the “new normal” in the age of Obama.

HornHiAceDeuce on April 23, 2014 at 8:10 AM

I have never considered my home as an “investment”, at least for me. I bought it because it’s where I wanted to live, and was a better deal than renting. Where I live, renting a 2-bedroom apartment would still cost over $300/month MORE than what I pay for mortgage, insurance, and property taxes.

Having said that, I never expect to get my money back from the house. Even though the “cost” of the house was “X” dollars, there’s almost an equal amount of money you have to spend in interest payments over the life of the mortgage. Thus, a $100K home actually runs you around $200K, if you keep it for the life of the mortgage. That’s beside the cost of repairs, upkeep, etc.

Don’t get me wrong, I will never go back to renting if I can ever help it. I’m a very happy homeowner. But I don’t see the value of my house doubling over the life of the mortgage. But, I WILL get a large chunk of that money back if I ever sell it, so there’s that. :)

TKindred on April 23, 2014 at 8:12 AM

Indeed hornhi

cmsinaz on April 23, 2014 at 8:13 AM

Given Emperor PenNPhone’s ideas for taxation, WORKING is a lousy investment!

ConstantineXI on April 23, 2014 at 8:14 AM

Will she let us mooch off her instead?

Horatia on April 23, 2014 at 8:14 AM

I’ve ever made in terms of pure cash return, but it’s saved me at least the $172,800 I would have spent without any return at all — which in real terms makes it the best possible investment I could have made.

You don’t include maintenance, the time to keep the property “up”, tools you buy, running to the nursery for that extra plant.

If you put the real math to work, it is a wash, except that it frees you up time wise, to rent. Which makes it more possible to either make more money or have more leisure time.

You can find bargains to rent, and that makes it even more beneficial…add to the millions who bought their house 8 years ago, who are still underwater mortgage wise, and you will find that for the past 10 years it would have been wiser to rent.

right2bright on April 23, 2014 at 8:15 AM

Hmmmmmmm, ……..:

mortgages
56m
Applications for US home mortgages fell last week; Mortgage Bankers Association mortgage application activity index declined 3.3% – @Reuters
end of alert

https://twitter.com/Reuters

canopfor on April 23, 2014 at 8:16 AM

From after the Great Depression until about early in the 21st century this was not true. Home ownership was one of the best investments the average middle class family or individual could make.

That was before the socialists farked it all up with their government promoted and sponsored ‘everyone should be able to own their own home’ effort.

With interest rates rock bottom and purchase of a home very risky there are basically no solid conservative investment options left for the middle class. This means the middle class will have a lot of trouble accumulating assets, no matter how frugal. And most Americans are anything but frugal.

Combined with inevitable rising taxes and a stagnant economy the American middle class is destined to see a steady decrease in living standards. It is destined to become what passes for ‘middle class’ in socialist Europe. Which has historically been lower middle class, with no assets, in America.

The inevitable consequence of big government wealth confiscation and redistribution and heavy regulation of the economy is a two class society. One where almost everyone is lower middle class. One ruled by a relatively small wealthy socialist overlord class. One in which there is relatively little economic mobility.

In such a system the lower middle class comprises almost everyone. They are taken care of, more or less, cradle to grave. But they cannot accumulate wealth and they are stuck for life about where they started.

Those that have already made their money, such as the Gates’s and the Buffet’s, become part of the ruling class. But there will not be any new Gateses or Buffets.

farsighted on April 23, 2014 at 8:20 AM

Odd, and it suggests screams that the people involved aren’t terribly well acquainted with economic reality.

Fixed.

Has the WaPoo ever been “acquainted with economic reality”?

itsnotaboutme on April 23, 2014 at 8:20 AM

You don’t include maintenance, the time to keep the property “up”, tools you buy, running to the nursery for that extra plant.

I’ve also rented, and I can tell you that I’d be doing a lot of that in a rental, too. Landlords aren’t exactly keen to spend money on maintenance. For serious cash plowed back into the home, I’d say that comes to about $20,000 — including $6,000 for new plumbing a few years ago. I’d have to spend about $150,000 more to make it a wash on what I’d leave on the table in a rental relationship.

Ed Morrissey on April 23, 2014 at 8:21 AM

For me the value in home ownership is the ability to create an environment to increase our quality of life. Easier to do this when owning a dwelling than when renting, for the most part. Don’t get me wrong, I have rented in the past and will most likely rent my final retirement dwelling before I expire in the not too far away future. Gots me brochure to The Villages and my blue pills ready!

HonestLib on April 23, 2014 at 8:22 AM

I live in a blue state in the east coast….my property taxes are so high and increase like clockwork every year…that I basically am renting the home I own from the government. Almost no retires can afford to remain in their homes because of the property taxes…the dream of living in your paid off home after you retire is long dead out here

Caseoftheblues on April 23, 2014 at 8:22 AM

Other factors to consider is the money a homeowner puts into his home, including cost of maintenance, upkeep, repair, modernization, etc. Renting an apartment requires very little upkeep. Not only must the costs of homeownership be included, but the opportunity costs associated with the time it takes to maintain a home.

WordsMatter on April 23, 2014 at 8:23 AM

Math is hard for liberals.

mountainaires on April 23, 2014 at 8:24 AM

Given Emperor PenNPhone’s ideas for taxation, WORKING is a lousy investment!

ConstantineXI on April 23, 2014 at 8:14 AM

Yep…Because the world needs a glut of bad poetry..bad music…bad internet theatrics and bad art from people with no discernible talent but lots of desire for instant fame through notoriety…

workingclass artist on April 23, 2014 at 8:27 AM

Ed Morrissey on April 23, 2014 at 8:21 AM

Some landlords.

I am a landlord and I do work for other landlords, some good, some bad (as you describe).

A rental property is an investment just like a home. The more you stay on top of things, the fewer problems you will have in the long run.

cozmo on April 23, 2014 at 8:27 AM

If one thinks of our federal budget (remember those, before the Reid Senate?), like a family’s budget as suggested by this article, then WHY NOT apply the very same OPPORTUNITY COST ANALYSIS or a COST/BENEFIT ANALYSIS to every item in the budget.

Clearly, the tradeoffs are real. We’ve all read that silly yet true bumpersnicker, “It will be a great day when our schools get all the money they need and the air force has to hold a bake sale to buy a bomber.”

For example, we’ve passed four decades raising appropriations for public secondary education, so that the amount per child is at record levels, even in inflation-adjusted terms. Yet we are surprised that test scores have not improved. Is that a rational cost benefit analysis and response? Really?

SomeDude on April 23, 2014 at 8:28 AM

A rental property is an investment just like a home. The more you stay on top of things, the fewer problems you will have in the long run.

cozmo on April 23, 2014 at 8:27 AM

No, it’s not an investment, not in the literal sense. No matter how good you are to the landlord, you will get no financial return on your cash paid in rent and maintenance. You are paying to maintain someone else’s investment. That’s the point.

Ed Morrissey on April 23, 2014 at 8:31 AM

Odd, and it suggests that the people involved aren’t terribly well acquainted with economic reality.

It gets harder to read anything in most MSM articles…farcical.

workingclass artist on April 23, 2014 at 8:32 AM

Homeownership is a lousy investment when you realize investing isn’t about saving money, but making money.

First off, any money you “save” by not renting is usually lessened (if not wiped out) by homeowner’s insurance premiums, interest on your mortgage, and property taxes (the last point is especially true if you live in NJ, as I do).

Still not convinced? Take the $300,000.00 you would use to buy a home and put it in the market over 30 years. You’ll triple it. No one sells a home for triple what they paid.

Buy a home because you want space for your family and yellow dog, Shep. Don’t buy it thinking you’ll make money on it.

Ted the Average on April 23, 2014 at 8:32 AM

Now, this may not be the biggest issue in the public square at the moment, but Rampell’s argument had to go through the “layers of fact-checkers and editors” we hear exist at journalistic outlets such as the Post. Yet no one apparently knew enough about the concept of “rent” and “opportunity cost” to flag the column and ask Rampell to address the gaping hole in her argument. Odd, and it suggests that the people involved aren’t terribly well acquainted with economic reality.

You forget that the effetes’ goal is the end of private property ownership. After all, those who own property, and thus see property taxes directly, tend to be less supportive of bloated local government than those who rent and have their property taxes hidden inside their rent.

Steve Eggleston on April 23, 2014 at 8:32 AM

All I can say is that the mortgage on my home in the DC area, inside the beltway, is less than what I would have to pay for a smaller apartment in the same area.

The big reason is the location. Five minutes downtown, Metro close by, and within walking distance of entertainment/restaurants/shops. Rampell’s claims don’t add up when you factor in things like location. Sure, I could get a larger and newer home further out into the suburbs but adding a 45 minute commute (one-way) to my day wasn’t a trade-off I was willing to make.

Happy Nomad on April 23, 2014 at 8:33 AM

Odd, and it suggests that the people involved aren’t terribly well acquainted with economic reality.

Doesn’t this describe liberals and Obama in particular?

BuckeyeSam on April 23, 2014 at 8:33 AM

My home value has gone up here in Texas, as I pay down my mortgage. Plus, my wife and I bought 10.15 acres in the rolling hills and piney woods north of Houston; it’s raw land but good investment plus plenty of hog and deer hunting.

MoreLiberty on April 23, 2014 at 8:34 AM

The WaPo guy probably owns several houses. Tha American dream of owning a house was true during prosperous times. We no longer live in prosperous times.

crankyoldlady on April 23, 2014 at 8:34 AM

Given Emperor PenNPhone’s ideas for taxation, WORKING is a lousy investment!

ConstantineXI on April 23, 2014 at 8:14 AM

The rat-eared wonder has freed you from job lock and this is the thanks you give your lord and master???? No wonder he hates us minions.

Happy Nomad on April 23, 2014 at 8:36 AM

All I can say is that the mortgage on my home in the DC area, inside the beltway, is less than what I would have to pay for a smaller apartment in the same area.

Happy Nomad on April 23, 2014 at 8:33 AM

That’s where you live? To each is to own but damn….I would not want to live near those crooks, or that area. When I was stationed down in Quantico during the Basic School as an officer I hated DC.

MoreLiberty on April 23, 2014 at 8:37 AM

The bigger problem for this writer seems to be that homes are not disposable enough for the attention span of a gnat generation. Shiny and new is what he wants and he sees no value in a 100+ year old home with character, charm and memories. And no value in learning the skills to keep a home updated through time periods.

myrenovations on April 23, 2014 at 8:38 AM

A rental property is an investment just like a home. The more you stay on top of things, the fewer problems you will have in the long run.

cozmo on April 23, 2014 at 8:27 AM

No, it’s not an investment, not in the literal sense. No matter how good you are to the landlord, you will get no financial return on your cash paid in rent and maintenance. You are paying to maintain someone else’s investment. That’s the point.

Ed Morrissey on April 23, 2014 at 8:31 AM

In some cities there are rent controlled apartments…some of these are sold to new squatterstenants after the occupants die so the rent controlled apartment can stay rent controlled.

It’s a mess and rent control has driven up the cost of rents in these cities as well as strangled development and available housing.

In NYC people rent shared rooms for the price of a rented studio apartment in most southern cities.

workingclass artist on April 23, 2014 at 8:38 AM

Buy a home because you want space for your family and yellow dog, Shep. Don’t buy it thinking you’ll make money on it.

Ted the Average on April 23, 2014 at 8:32 AM

You named your dog after Shepherd Smith?

Happy Nomad on April 23, 2014 at 8:38 AM

No one says you have to buy the biggest home you can afford 30 year payments on. Start small, pay it off, work your way up, and be mortgage free, in a large enough home by 45.

Worked for me, and not I don’t have a care in world, in the sense that I can live a low maintenance lifestyle for the rest of my life, if worse came to worse.

Renters will never be able to have that piece of mind. And THAT right there is the highest investment return one can ever get.

MNHawk on April 23, 2014 at 8:39 AM

That’s where you live? To each is to own but damn….I would not want to live near those crooks, or that area. When I was stationed down in Quantico during the Basic School as an officer I hated DC.

MoreLiberty on April 23, 2014 at 8:37 AM

DC is one of those places that people either love or loathe. I grew up here, my family is all here, so what can I say? I’d rather put up with the crooks than have to deal with Yankees.

Happy Nomad on April 23, 2014 at 8:40 AM

Maybe I could get a job with the IRS. not pay my taxes
get a Bonus, buy a Bunch of homes, and see if THAT is
a lousy investment?

ToddPA on April 23, 2014 at 8:43 AM

This is the kind of idiotic story we get from the major media when a market has bottomed.

When it’s topping, they’ll be back to telling us what a terrific investment home ownership is.

fadetogray on April 23, 2014 at 8:46 AM

Sure, I could get a larger and newer home further out into the suburbs but adding a 45 minute commute (one-way) to my day wasn’t a trade-off I was willing to make.

Happy Nomad on April 23, 2014 at 8:33 AM

Fully understand your decision. For our LARGE family, living in the city was not cost effective as finding a six plus bedroom home is quite expensive. Also, easier to raise kids in the boondocks, thus my commute is just shy of an hour each way. Owning the business helps in my work hours being flexible, but I decided to bite the bullet and endure the commute for the benefit of the rest of the family.

The family does not mind as that is two more hours a day they have to be free of my constant belching and passing of gas that us old men seem to do more and more often these days. Hmm, time for a beer and a few deviled eggs.

Hey you darn kids….come pull my finger before you get off my lawn.

HonestLib on April 23, 2014 at 8:46 AM

Meaning your worn, old-fashioned home is competing with new, relatively inexpensive ones.

Total and utter bullsh!t. The main home I grew up in was built in 1774, added on to in the early 1800s.

Catherine Rampell is not merely uninformed, she’s actively hostile to American ideals. Gawd, the rot is deep within this country.

rbj on April 23, 2014 at 8:48 AM

Ed Morrissey on April 23, 2014 at 8:31 AM

I didn’t say write, or even imply, that it was an investment for the renter.

cozmo on April 23, 2014 at 8:48 AM

I live in a blue state in the east coast….my property taxes are so high and increase like clockwork every year…that I basically am renting the home I own from the government. Almost no retires can afford to remain in their homes because of the property taxes…the dream of living in your paid off home after you retire is long dead out here

Caseoftheblues on April 23, 2014 at 8:22 AM

For all of the California bashing that goes on, this is one way in which California is still the best state of all. We fixed that problem with Proposition 13 back before the state went crazy blue.

fadetogray on April 23, 2014 at 8:50 AM

Don’t kid yourself that if you ‘own’ a home it’s actually yours.
Bcs it isn’t. You rent your home from the state & if you don’t pay that rent money every year after so many years they will take it from you & sell it to the highest bidder. That isn’t owning anything.
My house is certainly no investment: an early 70′s doublewide trailer house on the prairie in SW ND. But then it’s a ranch we are running first.
Bcs of rising property taxes here in ND (my state govt has grown by leaps & bound under REPUBLICAN leadership in the past decade+) I have no available $$ to improve my home just to be able to make it liveable. It took a nasty hail storm many years back to ‘cash’ in on insurance damage to give us enough to replace windows broken, siding damaged, etc.
We still have a lot of problems with this house, but at least I don’t have to live in town.
If you ‘own’ your own home you make feel as if you are ‘free’ to do with what you like with it, renovations, additions, etc.
But in reality, even that is curbed by regulations.
Sorry, none of us ‘own’ anything except the clothes on our back maybe.

Badger40 on April 23, 2014 at 8:50 AM

Ed has made a very good rebuttal to the claim here; allow me to add another factor that was completely ignored by Rampell, that even Ed forgot to mention: Her entire case is based on the model in which people move every 3 – 5 years, in which little real equity gets built up, and the mortgage is never paid off.

On the other hand, if you are in a position where you find a place you really like and intend to stay there for a long time, then the calculation is radically different. At some point, your “rent” goes to Zero, except for insurance and taxes. (But you pay that for your cars too, right?)

In my case, I have a 15 year loan, in a house and a neighborhood that I really like a lot, and which will be paid off in about 6 years. At that point, in a location where a comparable property would rent for $1500/mo, my “rent” – (insurance and taxes, summed and divided by twelve to give a monthly rate) will be about $300 per month – for as long as I choose, for the rest of my (functional) life if I choose.

And this is a “bad” investment???

I don’t forget that at this point it will function as a tax-advantaged IRA, if you will, in which I can shield about $300K worth of equity, slowly increasing at the rate of inflation over time (I don’t want or need any “booms”). An asset that I have the *ability* to cash in if I need to, but which is absolutely secure and under my personal control as long as I don’t need to cash it in. (Yes, good insurance policies are a big part of the security)

Pick a house and a neighborhood you like a lot and which is stable (there are plenty of those in any city) and stay there a long time. In that model, home ownership is still the best investment you can make.

p.s. Some will always say “well, you could have invested the money elsewhere, and gotten a better return, and your net equity would have been higher”. No, you couldn’t have invested that money elsewhere, because you had to pay rent with it. Ownership takes a necessary monthly cost and turns it into equity and long term security.

Tom Servo on April 23, 2014 at 8:53 AM

I didn’t say write, or even imply, that it was an investment for the renter.

cozmo on April 23, 2014 at 8:48 AM

Ah, I see. I misunderstood your point — but the post is more about primary homes as an investment, not rental properties, which are dicier.

Ed Morrissey on April 23, 2014 at 8:54 AM

For all of the California bashing that goes on, this is one way in which California is still the best state of all. We fixed that problem with Proposition 13 back before the state went crazy blue.

fadetogray on April 23, 2014 at 8:50 AM

Yeah, California fixed that all right. All those liberals selling out and infecting bordering states with lower housing costs really was a smart thing to have happen. I’ve heard reports that the infestation has spread as far as Austin and Denver.

Happy Nomad on April 23, 2014 at 8:55 AM

Tom Servo on April 23, 2014 at 8:53 AM

Good point. And I agree — if you plan to move every 3-5 years, stick with renting, but be prepared to see all of your cash evaporate with no return at all.

Ed Morrissey on April 23, 2014 at 8:55 AM

Funny part about that article and the arguments don’t mention is what happens when you pay off the mortgage. Paid ours off three years ago and what we had been paying has been going into savings!

Without the ownership portion of the deal I would still be paying rent.

Old Dog on April 23, 2014 at 8:55 AM

Why do we need to incentivize it when the opportunity costs already do so as strongly as they do?

Maybe it isn’t the consumer or end user that government-sponsored home ownership programs incentivize. Maybe it’s the lenders.

lineholder on April 23, 2014 at 8:58 AM

I bought my home (condo in the city) eighteen years ago for $234K I could sell it in one day today for $800K if I wanted. I bought land and built a house for about $400K ten years ago… I could sell it today for $800K as well. Or I could have taken my money and padded some landlord’s pocket… who is this Rampell woman?

dpduq on April 23, 2014 at 8:59 AM

How does WaPo stand on the Sustainability agenda? For or against?

lineholder on April 23, 2014 at 9:00 AM

For once, I will agree with a WaPo columnist. Catherine Rampell obviously refers to the second house, which is purely an investment, as opposed to the primary house, which also serves as a place to hang one’s hat. The terms “primary” and “first” are not in the original article and are inferred – wrongly, I believe – by Ed. A politicized, knee-jerk reaction in defense of the American Dream is not what I come here for.

Rix on April 23, 2014 at 9:02 AM

Yeah, California fixed that all right. All those liberals selling out and infecting bordering states with lower housing costs really was a smart thing to have happen. I’ve heard reports that the infestation has spread as far as Austin and Denver.

Happy Nomad on April 23, 2014 at 8:55 AM

It’s kind of like those plant and animal invaders that are not indigenous to an area. I forget what they call them.

crankyoldlady on April 23, 2014 at 9:03 AM

You forget that the effetes’ goal is the end of private property ownership. After all, those who own property, and thus see property taxes directly, tend to be less supportive of bloated local government than those who rent and have their property taxes hidden inside their rent.

Steve Eggleston on April 23, 2014 at 8:32 AM

Yep.

The cultural meme suburban sprawl was a fail…even if they haven’t realized that yet.

These folks are still pushing pods and sheds as alternatives because mega cities are the happening place to live or something…

The costs of automobiles and housing are inflated to ridiculous prices.

Today a new car (made mostly of plastic) is the same price ($35,000.00) as what my parents paid in 1968 for a 4 berm. 3bth. home in North Dallas. The neighborhood was developed with an elementary, Jr high and High school within walking distance. The neighborhood has remained stable.

My parents added a garage apartment for my grandparents in 1973 which increased the value. Mom got the house in the divorce and Dad moved to Colorado.

My mother paid off the mortgage in the early nineties and lived there until she died in 2009.

The house sold in 2012 for about $200,000.00 after spending about $35,000 in cosmetic upgrades…foundation and structure was sound. I think my sister (executrix) spent too much but that’s another story.

Current appraisal for the property is $278,000 and there is demand for housing due to the booming economy in Texas.

I’d say in this case owning a house was an excellent investment.

As they say…Location…Location…Location…

workingclass artist on April 23, 2014 at 9:03 AM

Going with the rent argument. I’m in the process of buying a house right now while living in an apartment. My apartment is 1350 sqft and the house is 1800sqft. Yet my rent is $940 and my mortgage will be about $990. So if nothing else I’m getting 500qft more for $50 a month. BUT, my rent payment has been going up about $20 every year (how you have an “up and coming” neighborhood in Tallahassee is beyond me). So in 2 years I would have been paying the same amount as my mortgage per month assuming that the house would not have gone up in price.

Zaggs on April 23, 2014 at 9:04 AM

Yeah, California fixed that all right. All those liberals selling out and infecting bordering states with lower housing costs really was a smart thing to have happen. I’ve heard reports that the infestation has spread as far as Austin and Denver.

Happy Nomad on April 23, 2014 at 8:55 AM

Proposition 13 has had the opposite effect. It has made people more reluctant to sell, so more Californians have stayed in California than otherwise might have done.

However, I brought it up not to sing California’s praises but to point out other states could copy the model in order to protect its property owners. You should all have done so already. Do it now.

fadetogray on April 23, 2014 at 9:05 AM

I’ll take owning over renting any day. See a problem? Fix it. No pestering the landlord to come fix it on his timetable.

Wall, you’re in my way.

CurtZHP on April 23, 2014 at 9:09 AM

The Wapo is happy to do what it can to take a dump on American values and traditions. Property ownership being #1 on their Leftist hit list.

Whitey Ford on April 23, 2014 at 9:10 AM

Eliminate the east/west coasts and, generally speaking, the only people making money on residential real estate are real estate agents. That has been my personal experience every time I have been in an escrow office signing papers.

Carnac on April 23, 2014 at 9:15 AM

I own because I can do whatever I want on my property, can’t do that when renting.

dmacleo on April 23, 2014 at 9:16 AM

I think everyone missed a big point here. Nobody there has to pay for rent or mortgage because they live in their Parents basement.

Johnnyreb on April 23, 2014 at 9:16 AM

but the post is more about primary homes as an investment, not rental properties, which are dicier.

Ed Morrissey on April 23, 2014 at 8:54 AM

My first primary home (a duplex I bought when I was 18) is now my favorite rental property.

It’s only dicey if you get taken in by some quick-buck investment property huckster.

Wall, you’re in my way.

CurtZHP on April 23, 2014 at 9:09 AM

Words to live by.

cozmo on April 23, 2014 at 9:17 AM

Rix on April 23, 2014 at 9:02 AM

I read the article too.

You are either an idiot, or a liar.

cozmo on April 23, 2014 at 9:20 AM

She addresses the points made by Ed (and many others) in follow-on article.

And she makes some good mathematical points. The downfall of her argument is that keeping investments moving in the right direction is a tough thing, and that market hindsight is not the same as market foresight.

But she’s not just some dumb reporter bloviating, for a change. She just didn’t write the whole article before submitting it.

Prufrock on April 23, 2014 at 9:20 AM

Ya know, if work hours weren’t being cut to 30 hours a week, and per month insurance rates weren’t soaring, a lot more people could afford to buy a home, which can be a good investment.

BTW, if the stock market is a better deal, why do Democrats keep fighting letting people invest their SS there? Why are public sector unions fighting going into 401(k)-style retirement plans?

Fallon on April 23, 2014 at 9:20 AM

Meaning your worn, old-fashioned home is competing with new, relatively inexpensive ones.

Well, here’s another gaping hole. Every house I see go up new costs more than the older homes in surrounding neighborhoods. I have yet to see a comparable one go up that is cheaper than identical homes around it.

Hmmm, maybe they’re not part of the “reality-based community”?

GWB on April 23, 2014 at 9:21 AM

It’s kind of like those plant and animal invaders that are not indigenous to an area. I forget what they call them.

crankyoldlady on April 23, 2014 at 9:03 AM

Invasive species? Like the emerald ash borer or kudzu. One day you’re living in a normal community, the next day it’s being over-run with liberals demanding change to suit their world view.

Happy Nomad on April 23, 2014 at 9:22 AM

I think everyone missed a big point here. Nobody there has to pay for rent or mortgage because they live in their Parents basement.

Johnnyreb on April 23, 2014 at 9:16 AM

All I’ll say is that if I were living in my parent’s basement, I’d be paying rent.

Happy Nomad on April 23, 2014 at 9:24 AM

Oi, what an idiotic WaPo article! Say it with me people, “MY HOME IS NOT A PIGGY BANK! MY HOME IS NOT A PIGGY BANK!”

That is the exact reason why so much damage was done by the housing market bubble – too many people treating their homes like piggy banks instead of what they really are, ie, a place to live and raise a family.

powerpickle on April 23, 2014 at 9:25 AM

Prufrock on April 23, 2014 at 9:20 AM

She picked years that benefit her thesis. In 1983 I had a 6% fixed loan. There have been good years and bad years in the stock market.

I understand that there are people who don’t want to own. That’s their choice.

I have also had tenants for over 10 years who could have bought the place they rented.

cozmo on April 23, 2014 at 9:25 AM

Not only must the costs of homeownership be included, but the opportunity costs associated with the time it takes to maintain a home.
WordsMatter on April 23, 2014 at 8:23 AM

How do you calculate the opportunity costs of working in the garden versus sitting on my rear watching TV. Face it. It’s easy to toss around those terms like opportunity costs but when applied to home ownership versus renting its really all about where you want to spend your free time. The only real opportunity cost with home ownership versus renting is when renting you got a lot of free time to work at that second job. Somehow I don’t really view that as an attractive opportunity.

JohnnyL on April 23, 2014 at 9:26 AM

JohnnyL on April 23, 2014 at 9:26 AM

How ’bout peace of mind benefits of being able to have a garden, or a back yard. My favorite was a garden railroad.

cozmo on April 23, 2014 at 9:37 AM

I have to disagree with you here, Ed, and I think you have fallen for the same error so many other people do. Rent it, of course, “money poured down the drain,” but there is a *lot* of “money poured down the drain” in the ownership sink as well.

If you own a house, you have to factor in:
1. Cost of interest on mortgage (currently very low, but not historically).
2. Cost of repairs and maintenance.
3. Property tax on both the house and the underlying land.
4. Closing costs and other costs associated with purchase. This can seem small, but it is really significant when you realize that you are really are getting absolutely nothing for this… just paying off middle men.

Also, you cannot compare the *current* rental prices to the *original* cost of your house. I suspect that rental prices were much less 15 years ago.

Finally, there is a very hidden cost of home ownership: it limits your flexibility w/r/t other opportunities that might arise. It makes it harder to move to find a better job/school or cheaper place to live if you get fired because the cost of selling a house 5-7 years after getting it are huge.

FBones on April 23, 2014 at 9:37 AM

Ed, another oversight by the WaPo writer relates to the return on investment “analysis” she performed. Typically, a homebuyer only puts down a (small) percentage of the purchase price.

Simple math: say you put down $20K on a $200K home that increases 1% in value a year. A $2K return on a $20K downpayment is 10% return on your investment even though the house only increased in value by 1%.

Bobnox

bobnox on April 23, 2014 at 9:41 AM

Well, somebody has to own the houses. Maybe this this is the beginning of a propaganda campaign to make home ownership unappealing. All the cool kids rent. Home ownership is an expensive hassle. Soon we will hear of a special government program to help people transition out of home ownership. Maybe the government will even buy your house and have it managed by HUDco. If people rented their homes from a quasi governmental agency, under the guise that it is what is financially best for them, it would be another way for the government to gain power and control. Maybe I am wrong, but these progressive things start out innocently. Like Stephy’s odd question about birth control just before the “war on women” started.

tdarrington on April 23, 2014 at 9:44 AM

The left just is lacking in critical thinking skills.

I purchased a home on the water with 200 ft of dock and no fixed bridges to the Atlantic Ocean.

I was able to pay off my mortgage faster because I rented out my dock to several people and I still enjoy the benefit of collecting the rent which now goes toward payment of my property taxes.

The properties located on the water have not lost their value.

Home ownership was a total win!

Jayrae on April 23, 2014 at 9:47 AM

tdarrington on April 23, 2014 at 9:44 AM

That could be it. But man, do the people renting houses think the landlord is losing money? The taxes, payments and repairs are the same.

I certainly ain’t losing money on my rental properties.

cozmo on April 23, 2014 at 9:47 AM

1. Cost of interest on mortgage (currently very low, but not historically).

3. Property tax on both the house and the underlying land.
4. Closing costs and other costs associated with purchase. This can seem small, but it is really significant when you realize that you are really are getting absolutely nothing for this… just paying off middle men.

FBones on April 23, 2014 at 9:37 AM

While your points have some validity, these three “hidden costs” are all part of my mortgage payment, and I suspect the same is true for a large percentage of homeowners.

(And, “just paying off middle men” would be another way of saying “paying an upfront price for services rendered and the right to borrow a large chunk of someone else’s money.”)

GWB on April 23, 2014 at 9:48 AM

It should read a home is a lousy investment in the age of Obama. I bought my house in 2005 for $135,000, it’s value peaked at the end of 2008 (value according to zestimate) at $143,000. It dropped to $113,000 in late 2011 and has just rebounded a bit to $120,000. I keep an eye on it because I’ll be moving in about a year or so.

Capitalist Infidel on April 23, 2014 at 9:48 AM

This is a new one: WaPo Derangement Syndrome. While I agree with Ed’s premise — I had the same thought myself when I read the piece — the idea that it represents some huge fact check failure of ideological bias is ludicrous. First, columnists more or less get to write what the want. That’s why Krauthammer and Will call the Post home. Editors don’t send their copy back for revision. Second, the premise is pretty simple unarguable: the long-term return on primary residences is historically low. This has been accepted wisdom among financial planners forever; one should never by a primary home as an investment (though you might get lucky), buy it because you prefer it to renting, and enjoy the forced savings/modest gains. Finally, far from being against property, you can bet that 99% of Post readers, editors, writers and columnists are now or will soon become affluent owners of private residences. We are not in favor of any economic system that will deprive us if our granite counter-top condominiums, funky rowhouses in cool neighborhoods or large detached homes on tree-lined streets near good suburban schools.

In short, don’t be deranged. It’s just an article you disagree with.

urban elitist on April 23, 2014 at 9:50 AM

Obama made out pretty well with his home purchase/ land swap in Chicago.

tdarrington on April 23, 2014 at 9:50 AM

Part of the alteration of home values is the quality of new constructions. Of course this can vary so the evidence is almost certain to be largely anecdotal (the old “they don’t make em like they used to” phenomenon), but all I know is the upper-middle-class house my parents built 15 years ago seems to be suffering much more in the way of chronic problems than the lower-middle-class house they built 30 years ago.

The Schaef on April 23, 2014 at 9:51 AM

I certainly ain’t losing money on my rental properties.

cozmo on April 23, 2014 at 9:47 AM

I lost money on a home I rented in the 90s. The home sales market was good enough that I couldn’t keep it rented if I charged enough to pay the mortgage and costs. That happens sometimes.

GWB on April 23, 2014 at 9:52 AM

Best real estate deal is to inherit property that was first bought by grandparents. All paid off.

I bought homes to live in and to rent out.
People always forget to factor in interest on the loan.
“Bought house for $100K X-years ago and sold it for $200K – made a profit of $100K!” Wrong. Forgot the interest and other payments.

Only good to buy a house if you plan to live there for at least 10-20+ years. If you are in a career that calls for making moves every 5-7 years or need to find a new job, forget buying. (And buy a house and rent it out after you move is crazy. A big pain in the butt. BTDT.)

One either rents the house or rents the money.

albill on April 23, 2014 at 9:53 AM

FBones on April 23, 2014 at 9:37 AM

All very legitimate points. I rented early on in my adult life (rented for over 14 years) because I was moving around too much. It just made much more sense to be flexible.

However, when I finally settled down, a home was the better option for us. I know not everyone wants to be a handyman/landscaper, but I find the “hidden cost” argument to be a bit overblown – you’d be amazed how easy it is to fix most issues that arise and you can easily pay for insurance products like “American Home Sheild” for jobs that are outside your skill set.

Anyway, you touch on the exact point as to why the WaPo article is so ludicrously stupid – owning vs renting all depends on your personal situation, where you live, your career etc, etc….to say that home ownership is “not worth it” or “always a bad deal” is the height of stupidity.

powerpickle on April 23, 2014 at 9:53 AM

Housing is a necessary asset that one needs in life. Is it an investment, not really. It does not pay a dividend and it does not have a great chance at becoming a blockbuster investment. But what money one does pay to buy the house should at least maintain its value. While you live there, enjoy life, perhaps raise a family, your money is parked, so to speak.

SC.Charlie on April 23, 2014 at 9:53 AM

but the post is more about primary homes as an investment, not rental properties, which are dicier.

Ed Morrissey on April 23, 2014 at 8:54 AM

The notion of a primary home as an investment has many twists but the biggest factor is the marginal utility aspect. You have to pay to live somewhere (utility. Deriving profit from a purchased necessity is not a typical financial model to exploit. Deriving profit from rental property is a typical financial model to exploit, both in terms of revenue and investment potential.

DanMan on April 23, 2014 at 9:55 AM

This is a new one: WaPo Derangement Syndrome.

Yes, because no one’s ever taken issue with WaPo before today.

the idea that it represents some huge fact check failure of ideological bias is ludicrous.

I don’t really see anybody, the author in particular, reading this as a progressive screed.

Second, the premise is pretty simple unarguable: the long-term return on primary residences is historically low.

That’s actually a reason to the actual premise: that home ownership is nonsensical. The issue that people are taking with it is that ROI is one of the stupidest reasons anyone would have for buying a house, yet it is the primary thrust of this article.

In short, don’t be deranged. It’s just an article you disagree with.

urban elitist on April 23, 2014 at 9:50 AM

And these people are disagreeing with it. Don’t be deranged in your response.

The Schaef on April 23, 2014 at 9:55 AM

Great post, Ed. I like your writing when you are ornery. YOu really ought to do more of it. Another gaping hole that always bothers me is this argument:

Never mind that so many people lost their shirts (among other possessions) in the recent housing bust.

Ahh, yes, I well remember, “Over the same period, the Standard & Poor’s 500-stock index has had comparable annual returns of about 6.5 percent.”

Dusty on April 23, 2014 at 10:04 AM

While you live there, enjoy life, perhaps raise a family, your money is parked, so to speak.

SC.Charlie on April 23, 2014 at 9:53 AM

Parked? Only if the value of the house goes up with the cost of owning it.
Buy a house for $300K and 10 years from now sell it for $200K? Money parked in the wrong place.

Owning a house should be looked as a place to live, not a get rich scheme.

albill on April 23, 2014 at 10:11 AM

Buy a car is certainly not an investment, period. But it is an necessity, if you live nearly anywhere in the United States.

SC.Charlie on April 23, 2014 at 10:13 AM

Sure, there’s been plenty of criticism if the Post but it usually has some basis in reality (however slim) or informed opinion. This is more of an “I don’t like your necktie” sort of thread. Picking out something trivial to start a fight over and then free associating a further list of imaginary offences.

Again, I largely agree that failing to discuss home ownership within the larger context of spending money on shelter one way or another is slightly dumb. When disagreement woth one column becomes an excuse to rage against the whole editing/fact checking process and, as some posters have done, suggest that it reflects some larger Post-based anti-private property agenda, I think we’re crossing into silly territory.

urban elitist on April 23, 2014 at 10:15 AM

Well, someone has to own the home that is being rented, right? Oh, now I get it. That pesky ownership thang is so old school, we is in the new school now. Government should own all housing and take away that unfair and unnecessary burden, allowing us to spend more time painting, sculpting, and stuff like that.

Borgcube on April 23, 2014 at 10:20 AM

Former WaPo readers: A Washington Post subscription is a lousy investment.

Galtian on April 23, 2014 at 10:29 AM

Homes were never meant to be a piggy bank. In fact, 30 year mortgages were unheard of before the 1950s. The purpose of owning a home is to pay the principle down, and hopefully pay it off. Never borrow more than 80% of what the home is worth and do not touch the equity. There is a lot missing in this article.

lea on April 23, 2014 at 10:33 AM

I get it…and if I had a wife or kids I’d totally own, but I don’t need a 3-5 bedroom house being single, and certainly don’t want roommates. So since I’m single, my $750/month for an upgraded condo in the “fun” part of Scottsdale makes more sense than the $1500-2000/month a decent house in this area would run me.

nextgen_repub on April 23, 2014 at 10:36 AM

Seems to me there is a social benefit to home ownership that hasn’t been mentioned. Because I am buying my home and because I am investing a significant amount of equity in it, sweat and otherwise, I care about my community. I care what the city spends money on, what the status of the schools are, participate in local events, know many of my neighbors. Raising our family here helped us establish roots and a strong social support network.

Unless you are in a neighborhood of long-term renters, you don’t get that.

March Hare on April 23, 2014 at 10:36 AM

The only thing left to point out is the gender of the muddle-head making her lame argument – yep. Female.

Women in general make terrible investment decisions. How sad for others to pay attention to them. There is a good reason for the commandment that wives submit to their husbands. It’s because men think differently from women. The linked WaPo argument makes that chillingly clear.

chuckh on April 23, 2014 at 10:43 AM

That was before the socialists farked it all up with their government promoted and sponsored ‘everyone should be able to own their own home’ effort.
farsighted on April 23, 2014 at 8:20 AM

Everyone should be able to own their own home.
Everyone should be able to go to college.
Everyone should be able to have healthcare.
Everyone should be able to …

Provided by the government.

The government is like the anti-Midas. Everything it touches turns to crap.

yongoro on April 23, 2014 at 10:43 AM

My wife and I took all of our savings and purchased a home for $419K in 2000 with 25% down. That was earned over ten years of hard work, saving every dime and living light. Thanks to Barney Frank, Dodd and Obama, we sold the place for $312K a few months ago. In 2007, we were offered $487K by a real estate agent representing a client that wanted to purchase a home in the neighborhood. We are like millions of other Americans, who were raised in a nation where real estate was an investment. Hope and Change has eliminated that dream.

Hening on April 23, 2014 at 10:46 AM

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