Homeownership forces you to build wealth

Three green houses on stacks of coins

I am terrible saver, and yet I’ve managed to amass enough savings to retire -- assuming I can manage to stay employed throughout my 50s and 60s.

What’s my secret?


Like most people, a dollar in my wallet is often a dollar spent. A dollar sent off to the mortgage company, however, is a dollar eventually invested in my retirement.

Housing is a wealth-builder because if you start paying off a house in your 20s and avoid the temptation to cash in your home equity by repeatedly refinancing into yet another 30-year mortgage, when you hit your 50s, you won’t have a mortgage payment any more.

You’ll have ownership of a major asset.

Turn your starter home into a rental property, and you’ll have someone else investing for your retirement every month.

Writer Janet Lowenthal and Myron P. Curzan, the CEO of UniDev, which specializes in developing housing for moderate-income public employees, take that argument one step further in a Politico.com column "Dismantling the American Dream."

While arguing against the winding down of government-sponsored mortgage giants Fannie Mae and Freddie Mac and the withdrawal of the federal government from the housing market, Lowenthal and Curzan suggest that without homeownership and the equity it provides, low- and middle-income families would find it harder to send their kids to college and supplement their retirement benefits.

In fact, the pair contends homeownership beats investing in the stock market for many earners: "For these citizens, the forced savings required by home ownership can be the only feasible avenue for building wealth."

They calculate that $20,000 invested in the stock market over 30 years yields $152,000 (using a 7% rate of return on your stocks).

Change that investment to a $20,000 down payment (or 10%) on a $200,000 home.

Assuming that house appreciates at slightly better than a 2.5% rate of inflation, after paying off the mortgage in 30 years, the investment will have grown to $485,000.

That's a difference of more than $330,000.

Even if you quibble with their math, you can’t get around the argument that most of us spend what’s in our wallet and save money we don’t see.

That’s why, for some people, the forced savings of paying off your mortgage each month is a more effective way to save than trying to set aside money each month.

That, and the fact that you can’t live in your stock market investments.

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