Is Your Home Truly an Investment?



In a previous article, I talked about buying a home with my parents and how this really jumpstarted my financials.  I still remember my realtor congratulating me on “the biggest investment that I’d ever make” on the day we closed on my house.  I thanked her and took the keys, thinking I had made the wisest decision of my life.  


My Home “Investment”

At the time, the housing market was on fire, and I thought my decision to buy a home was a no-brainer.  Since I had bought brand-new construction, I had actually put down a contract on the house in December of 2003 but didn’t settle until mid-June of 2004.  My house had risen in value by more than 15% in just six months, with no end in sight.  I think at the very top of the market that my model ended up selling for 50% more than what I paid.  Then obviously the housing crisis hit, and my paper gains evaporated.


home-investmentLooking back, I’m glad I made the decision the buy my house.  But, I don’t think homeownership is nearly the slam dunk that realtors and others make it out to be.  In some ways, I feel like the American Dream of getting married early, buying a house and having a children is a picture-perfect ideal that people get swept into.


Type in “home investment” into Google, and you’re littered with the benefits of homeownership and why renting is the worst thing that you can do.  While I am a big fan of owning your own property, I realize that it doesn’t always make sense for everyone.


According to the data, I bought at the absolute homeownership peak.  In Q2 of 2004, homeownership peaked at 69.2% in the United States.  Since then, homeownership has retreated steadily and now stands at 62.9% for the end of Q2 2016.


Homeownership Trends


home investment

home investment


As you can see above from the Census bureau data, homeownership continues to decline each quarter since 2010.  Based on this data, if you’re thinking about getting into the rental property market, it would seem that you’d be in the middle of a bull run.  Who knows how much longer this will continue, but the data at least suggests that more people are moving away from homeownership and towards the flexibility to rent.


On a side note, one of the things that I’ve never understood is why the US offers homeowners the opportunity to write off mortgage interest.  I know the principle behind it is to encourage homeownership.  However, if we look to our friends to the north, Canada does not offer mortgage interest deductions on tax returns, and their homeownership is virtually the same at 67.6%, if not higher than ours.


My Wise Friends

home investmentWhen I bought my house, I knew that I would be in my property for the foreseeable future.  I had just started a job and was really happy with the location.  But, most of my friends rented because they knew they didn’t want to plant roots in this area.


It was a smart move for them, as I unfortunately bought towards the top of the real estate market.  In the twelve years that I have owned my home, it has only gone up by about 21%.  That means on average, my house has appreciated by 1.75% per year for the last twelve years.  In contrast, the S&P 500 has returned 7.65% with dividends per year over the last twelve.


Home as a Savings Account

piggy bankOne of the questions that I continue to ask is why is a home considered an investment?  I think a better way of looking at homeownership is a forced savings account.  Think about it for a second.  The current interest rate on my online bank account is 1%.  My appreciation in the home that I live in is 1.75%.  There’s not much difference between the two.  


In a couple of years when I sell my home, I don’t plan to live in a home that costs substantially less.  If anything, I will probably pay a little bit more since we have a growing family and would like a little bit of land for the kids to run around.


Staying Put for the Long Haul

tree rootI know a lot of people say that they will buy an expensive home now and then downgrade in the future when a more modest home makes sense for them.  That way they can utilize the proceeds that they make from selling the house.  This is great in theory, but I don’t think it always comes to fruition.


Most of the people that I interact with love being close to their families.  My grandma has lived in the same house since 1965, my other grandma since the early 1980s.  They have no plans to ever leave these homes to subsidize their retirement.  My parents have told me that they never plan to leave their home.  Maybe this has jaded me, but looking at homeownership as a retirement savings account has never been something that I’ve considered.


What do you think?  Do you think a home is a good investment?  Do you plan to fund your retirement with your home?  Share your thoughts below.

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Welcome to the website. A mustard seed is a very small seed but astonishingly grows very large over time. My hope is that through your financial journey that your small investment in time, money and faith will grow beyond anything that you could ever imagine.


  1. People will obviously have good reasons for doing either, but I agree with you that home ownership does get oversold for the millennial generation.

    Owning gives you independence and freedom, 30 years later in exchange for lower financial flexibility now. Renting highlights our long-term dependence on each other but gives you short term flexibility and independence.

    The majority of our population is now clustering in major metropolitan centers. The average owner is drifting away from the 3bed/2bath on a couple of acers we see advertised. In the past you could argue once you own your land, you are gaining independence, i.e. a homestead that you could almost sustain yourself on as our founders did.

    Is is hard to support yourself in 1200 SQ feet 15 stories up downtown somewhere. When you buy a home, in part you are buying land. In many places, the majority of the value of the home is in the land it sits on and not the value of the home itself.

    Myself, It made sense to get into a neighborhood with little crime, and close to work. Buying also gives me a tax break and is forced savings. For a new graduate just starting out working their way up the career path, renting makes much more sense.
    Doctor in Debt recently posted…Supercharge Your Debt Reduction by Changing Your Financial NarrativeMy Profile

    • Thanks for sharing!!! I definitely agree with everything you said. For new graduates I definitely think they should wait a bit before they buy so they can figure out where they want to be. Why get locked in somewhere and miss a potential opportunity?

  2. For me, the buy versus rent question has always been a tough one, as so many specific aspects have to be considered. I am basically a proponent of owning real estate for various reasons (diversification etc.). I agee with the points you are making, it can be to the substantial detriment of the financial flexibility, the opportunity costs are substantal (historically stock market returns exceeded real estate return) and there is always the risk to overpay for the property, which makes every investment a bad one. My wife and I are still looking for our Dream House

    • Thanks for stopping by and sharing!!! Definitely take your time and don’t rush it. Too often people follow the herd mentality and don’t think through the whole decision. Good luck in finding your Dream Home!!!

  3. I’m with you, homeownership is not an investment. You can’t sell your house and live on the street, something has to replace it. As such your opportunity to take a return is limited. Also maintenance is a constant thing, your always using up a part of the house and replacing or repairing. Combine the two along with that its highly illiquid (expensive to sell), non diversified (exposure to one market only), and provides no coupons unless your renting. Even if it were an investment you’d measure it as poor compared to other options.

    I can see the forced savings aspect though. Frankly I look at home ownership as simply an alternative to renting. Would you trade perpetual monthly payments for possibly a similar payment with an end 30 yrs from now. Do the math and figure out which comes out ahead in your area.
    Full Time Finance recently posted…Perceptions of the Value of MoneyMy Profile

    • That’s a great way to think about it. At some point you hope the payments stop with a home that you own. Renting a property unfortunately the payments never end. Awesome way of thinking about it.

  4. I am with you. I don’t view a home as an investment. (I wrote a whole lengthy post about it, so I won’t make you deal with my full rant today :-))

    I think you are absolutely right in the house as a forced savings account. You have to make your mortgage payments every month or you will end up homeless. A portion of the mortgage payment goes to equity. You end up being forced to build up your equity.

    And maybe this is why people see owning a home as an investment. The statistics show that most people are barely saving. Maybe they see the forced savings in a house as their only way to make progress. (Obviously I disagree with them, but maybe that is part of the mindset.)
    Matt @ Optimize Your Life recently posted…Hedonic Adaptation is Making You Poor and UnhappyMy Profile

    • Thanks for sharing Matt and I’ve definitely read your post 🙂

      I guess in some ways forced savings is better than no savings. But if you’re diligent saving outside of just your home, you will definitely have some flexibility in the future.

      I read the other day about a woman that lives exclusively on a cruise ship and travels the world.

  5. I see a home that you live in as more of a forced savings account, rather than an investment. Since you have to pay to keep living in it, over time, you end up with a chunk of money (i.e. what you put into your home by paying off your mortgage). While you’re living in it, a house is really just a consumption good. It costs you money to maintain, insure, etc. One way we’ve been able to pull some money out of our home is to Airbnb our guest room. We’ve had a great experience doing it so far and it’s a nice way to extract some income out of unused space in your house.
    Financial Panther recently posted…Why I Prefer To Pay Off Debt AggressivelyMy Profile

    • That’s an awesome idea. I had not considered using Airbnb for our guest room.

      Part of me is worried about having a stranger in my house but I’ve heard it’s a great way to get some extra income.

      Thanks for sharing!!!

  6. I think it depends really. If you buy a primary home in an appreciating market, then technically you are building equity and I would consider that an investment.

    When I bought my “forever” home in Austin years ago I had no intentions of ever selling it, if anything I was going to rent it out if I moved however in just a few short years, It appreciated over $130k and at that point, I was inclined to sell. I made good profit off that house.

    Its because of that I think a house is an investment and I can tell you that I will be retiring early from real estate. Not necessarily from my primary house but because I have 6 rental properties right now and plan on buying more.
    Alexander @ Cash Flow Diaries recently posted…October 2016 Net Worth UpdateMy Profile

    • Thanks for sharing your experience Alexander. I’ve heard some really awesome things about renting out homes as an investment. Unfortunately I haven’t been able to find anything that hit the 1% rule in the area that I live in. But I’m definitely interested to learn more.

  7. I think forced savings account is a good way to put it…my co-workers who are bad savers benefit from this. But for those in the FIRE crowd, I’m not sure we need to be “forced” to save. If renting and investing the difference makes more sense, that might be the better route to go. It is tough though when you’re in an appreciating market. I consider going back to renting at times (we own a co-op after renting for several years…and might need a bigger place soon)…but the appreciation in my area (NYC) is so tempting that I’m scared of missing out on that.
    Andrew@LivingRichCheaply recently posted…How Will Your Children Pay For College?My Profile

  8. For us, buying a home made sense as a mortgage didn’t cost much more than our rent (and to have rented a house like we bought, the rent would certainly have exceeded the mortgage). It made sense to buy our own house and have mortgage payments going towards something we owned. Sometimes, you just have a feeling of what’s right for you. In our rented house, I never felt properly at home. Of course, that could be down to renting an absolute dive of a place to save money on rent!

  9. On a long term (if we take that the particular neighbourhood will keep equally appealing) property prices rise around the same with inflation. So your 1.5-2% figure makes perfect sense.
    I also strongly believe that you shouldn’t look at your house where you live as an investment. Instead, you should compare it with renting the same kind of property to see whether it’s a good buy.
    Buying a rental property is of course a totally different story…
    Roadrunner recently posted…Rent or Buy? – Part 4 (Mortgage Length)My Profile

  10. Although we made a decent amount of profit after selling our last two houses, I don’t see us making much when we sell our current house. That said, we’ve never viewed our primary housing as an investment. As Roadrunner mentions above, a rental property would have different objectives.

    Eventually we will sell our current house to downsize and we may rent for a few years in different parts of the country to see where we want to settle down. Once we find that ideal (as ideal can get) location, we will likely buy a house for the last time – preferably build a house to meet our needs and wants.
    Mr. Need2Save recently posted…Boo! Social Security and YouMy Profile

  11. Home ownership is first and foremost an emotional decision. It has little to do with finances. We bought our home in 2012 – it was a decent time to buy. Mr. BITA dragged me kicking and screaming to home ownership. Why was I so reluctant? I grew up moving once every one-two years because my father was in the army. I love moving to new places and new houses. So my worry about home ownership had more to do with knowing myself and my potential itch to move to a new place ever so often than to do with any smart financial argument.

    Our home has worked out pretty well for us thus far, financially. That is a fluke though, and we got lucky. We bought because Mr. BITA grew up believing that that is what you do when you are “all grown up”, not because we considered the finances of the matter too deeply. Our home _may_ contribute to our FI nest egg if we decide to move. We live in one of the highest COL areas in this country. So it seems extremely likely that if we sell, even if we decide to buy again elsewhere, the sale will pad our stash.
    Mrs. BITA recently posted…On the path to financial independence: October 2016My Profile

    • Thanks for sharing Mrs. BITA. I love hearing your perspective growing up in the Army. I can definitely see that you would have a totally different idea of home ownership compared to your husband. Thanks for sharing!!!

  12. That’s an interesting point about a house being a forced saving account. I never thought about it like that.

    Personally, I really wouldn’t consider your primary residence to be an investment. I mean I would be buying a house to live in, not flip it after it appreciates 30% haha. Plus it would be hard for me to think of a house as an investment because there would be a high level of emotional attachment.
    Andrew recently posted…10 Ways To Improve Your LifeMy Profile

  13. Ditto, ditto and ditto. We experienced the same thing when our suburbia house dropped in value by $100k. All of a sudden our huge net worth wasn’t so huge anymore. We’ve looked at home ownership differently ever since.

    • Thanks for sharing!!! When home prices fell that was an extremely difficult time even if weren’t selling. I remember thinking I can never move and it was a somewhat depressing feeling. Luckily things bounced back 🙂

  14. It’s an asset that appreciates in value over time (usually), so in that sense I don’t see anything controversial about labeling it as an investment. Generally (I guess unless you’re particularly knowledgeable about local markets, locations, etc) it’s not a “good” investment in the sense that other vehicles such as the stock market will likely outperform it over long periods.

    I vaguely recall a stat that said the average American doesn’t have any money at all in the stock market, so house ownership at least beats bleeding out your purchasing power through inflation, assuming they’re just sitting in cash or super low interest savings accounts.
    MrSLM recently posted…Financial Update – October 2016My Profile

    • Thanks for sharing Mr. SLM. I look at home ownership like a savings account. Both of them are assets and definitely have about the same investment growth rate. Nothing wrong with 🙂

  15. I think it is an investment, primarily for the forced savings component. It also acts as a hedge against inflation – as inflation is lowering the real value of your debt over time.

    I read some statistics recently that homeowners are far more likely to retire comfortably than non-homeowners, andI think its primarily due to the forced savings aspect. I suppose for people who don’t necessarily want to deal with saving for retirement, home ownership is a good default option (on average!).
    AustralianDividendInvestor recently posted…Should You Reinvest Your Dividends?My Profile

    • Thanks for sharing those stats. It makes sense in theory that well off people are more likely to own a home and hedge against inflation vs. less affluent people that may be required to rent and struggle into retirement. Thanks for sharing!!!

  16. Great post MSM!
    It’s definitely an interesting topic to discuss.
    My view on it is that it depends on the person. Like you said in the post, it’s a forced savings account. For some that is great, for others it might not be the most ideal. Some people might naturally be able to save more and avoid interest, property maintenance, taxes etc. Also, some people move too quickly to let the value grow.

    Overall, it’s a great way to grow net worth, but it certainly has it’s drawbacks and inconveniences too. I go by the book ‘Rich Dad Poor Dad’. He says the home you live in is not an investment. It depends on the individual and their goals though.
    Graham @ Reverse The Crush recently posted…7 Savvy AF Snapchat Users To FollowMy Profile

    • Thanks for sharing Graham!!! I can’t agree that’s its a great way to grow net worth over time especially if you’re lousy with saving.

      I haven’t read Rich Dad, Poor Dad in a couple of years but I definitely need to re-read it.

      Thanks for sharing!!!

  17. Nice post, MSM. Good coverage of the different perspectives on homeownership.

    My view on housing is that, as an investment, it’s a terrible place to tie up your money. But most of the “returns” on housing aren’t found in the financials; rather, they’re in the use of the property. After all, you have to live somewhere! So there’s value in having real estate as part of a balanced portfolio, particularly when taking into account the utility argument.

    A big problem seems to be that homeowners come to depend fully on their paper equity in a home as a source of wealth and/or retirement financing. This is an obvious problem from a risk concentration perspective alone. Not to mention, again, you have to live somewhere! So you can’t really liquidate that equity without giving up some utility…

    Nice post, and thanks!
    FinanciaLibre recently posted…Why Minimalism Makes You HappyMy Profile

    • Thanks for sharing. I think you said it perfect, “most of the “returns” on housing aren’t found in the financials; rather, they’re in the use of the property”

      So true and wise 🙂

      Thanks for stopping by!!!

  18. Our home has been a fantastic investment! But only because we did it the smart way. We could have afforded a $350K home and been neck deep in debt, but we chose to find a more modest home for 165K that filled all of our needs in a nice area with miles of bike trails out of our backyard. We put 20% down, which led us to have a very low mortgage payment. We’ve been investing the remaining portion of our check into mutual funds, so I believe our home has been a great investment on several fronts: 1) It gave us a perfect roof over our heads with a low payment. 2) We were able to save and invest more than we could have if we had rented. 3) We are simply living a happier life in our home where there’s lots of cool areas to explore nearby, and a drama-free neighborhood to relax in. For these reasons, our home has been a great investment for us.

    • Thanks for sharing your perspective Bill. Sounds like you bought the right home for you and really have taken advantage of the low mortgage payment to invested the rest in mutual funds. Sounds pretty smart to me. Congrats on the awesome purchase!!!

  19. I look at homeownership as just another necessity. It’s just as Robert Kiyisaki says “your home is not an asset, it’s a liability.” Now obviously you can make money owning a home through appreciation, tax savings, and debt paydown/equity build-up. But those are just the icing on the cake and are shouldn’t be counted on. Owning a home is not really an investment because it doesn’t offer you a yield. Now a rental property on the other hand can certainly be an investment, especially if the rent is more than all of the expenses and mortgage payment. This would be more of a true asset.
    Your First Million recently posted…WEEKLY BOOK RECOMMENDATION: “The 10X Rule: The Only Difference Between Success And Failure” By Grant CardoneMy Profile

    • Absolutely a rental property is definitely an investment. Especially if you buy at the right price. Homes are exactly what you say, a liability!!! Until you sell it it’s nothing more 🙂

  20. Does your 21% increase in home value account for selling costs? It can cost upwards of 6-8% to sell your home which further erodes that rate of return. I have many clients that are sold the “dream” to later find out that they are underwater after 5-10 yrs of ownership.

    • Hi Andi – Yes the number includes the selling costs in this case. I thought it made it easier to show what my take home would actually be 🙂 Thanks for sharing and I apologize for not outlining that earlier.

  21. As others have said, this topic really makes me pull my hair out. I suppose for your primary residence there is a strong argument for buying, but as an investment (to let) the waters are more muddy. I would argue however, that you are leveraged on your home, so 21% is not an accurate reflection of your capital returns. Say your home cost $100k but you put down $20k. Now your home is worth $121k you have made more than 100% return on your $20k investment. Even if you are paying ongoing mortgage interest, you would be paying rent anyway. In this way, your returns may have exceeded those had you instead invested in the stock market at 8% annual returns.
    Paulie recently posted…A Layman’s Introduction to…. Net Investable AssetsMy Profile

    • Hi Paulie,

      Good point on measuring investment returns in a home, what bothers me most about real estate as an investment, even as a primary home, is how illiquid it is and all the fees associated with selling your asset. If you don’t realize the gain then it’s just paper asset appreciation, which doesn’t help me pay my bills unless I’m using a home equity line of credit, and that’s just a whole other mess.


      Isaac recently posted…Do You Feel Wealthy?My Profile

  22. Hi There,

    Thanks for posting your thoughts, really enjoyed the article.

    Personally I had some success with owning a home, made some money on my first home thanks to a hot housing market and decreasing interest rates, but I know that isn’t always the case and I think at least for my parents generation it was more often than not, so as a millennial I feel like I got sold a false bill of goods on that, interest rates have nowhere to go but up and what happens to home values when that happens?

    I’m out of the housing market now and renting and I’m so glad to be doing it, not having the debt and not being worried about maintenance expenses is a big weight off my shoulders, and it’s freed me up to do a lot of other things with all the stored up wealth I had in the house.

    That’s another thing I don’t like about home ownership, it ties up your money.

    Forced savings is a good way to put it, if you’re not disciplined then maybe it is a better bet for you, as long as the market value holds you might come out ahead, and the financial industry is geared to let you leverage at ridiculously low interest rates for really long periods of time compared to any other investment you could make (Try going to a bank and asking for a $300,000 securities investment loan with no down payment at 3% for 30 years and they’ll laugh you out of there) but it happens with houses all the time. So there are some tax advantages and the power of leveraging benefits you if the market goes your way.

    Anyway, thanks for your perspective, glad to see other people don’t think owning a home is the be all end all, it’s a choice you make, with positives and negatives.

    • Thanks for stopping by and sharing Isaac!!!

      Sounds like you were one of the lucky ones to get out and not take a blood bath in the real estate market before the downturn.

      I definitely agree that it opens up a lot of possibilities in the future especially if you want to have the flexibility to live elsewhere.

      Thanks for sharing!!!

  23. When you decide to invest in an income property, you become your own boss. You choose what property to invest in, what tenant you will rent to, how much you will charge in rent and how you will manage and maintain the property as a whole.

    • Thanks for stopping by Rentvestors!!!

      I definitely think an investment property that you plan to rent out is a worthwhile investment if you can buy and rent at the right prices.

      Thanks for sharing!!!

  24. It’s true that we Canadians do not get a tax deduction on our income tax when it comes to the mortgage interest. However, if we get a HELOC and use the proceed to invest, then that part of the loan is tax deductible. In terms of investment, I definitely think so because I was able to greatly benefit from the appreciation of my house and was able to leverage those gain to make more money in the stock market. As for retirement fund, I have yet to be decided, but I hope that I don’t need to use it as an ATM when I retire.

    Disclosure: I am a licensed Realtor :).
    Leo T. Ly @ recently posted…Freedom 48 Investment Toolkit: Foreign Market Investment BasicsMy Profile

    • Thanks for the disclosure Leo 🙂

      I appreciate your insight from a Canadian perspective as I am much more familiar with U.S. tax law.

      The HELOC sounds like it’s a nice loophole to if you can potentially make smart investments in the stock market.

      Interesting how different countries operate.

      Thanks for sharing as always!!!

  25. I know people who are doing well with multiple rental properties, so I think it can be a good investment. I do want to own my own home one day. I have been renting different homes for the last 13 years and would like to have a place that I can call my own and to be able to put my own stamp on. Great information, thanks for sharing!

  26. If you are looking to invest in the current real estate market then you are definitely not alone. Many individuals and companies have been purchasing investment properties with home prices starting to rise and interest rates remaining low. Now is definitely a perfect time to invest in real estate if you have the capital to make it happen.

  27. I agree with you that homeownership is not the “no-brainer” that most make it out to be. When you factor in principal and interest, property and school taxes, closing costs on the front and back end, maintanence and repairs and the value of your own time invested into upkeep; it may make more sense to rent and invest the difference. Also, after spending 18 months trying to sell a home during the worst housing market since the Great Depression (2008), renting and maxing out all retirement accounts has treated me very well.

    • Thanks for sharing MB55!!! I think it’s a false narrative to believe that you have to buy a house. In some situations it doesn’t make any sense. Thanks for sharing your perspective!!!

  28. Arguably the most successful and richest investor in the world, Warren Buffett, has owned the same house since 1957. Buying and selling homes only benefits realtors. As long as new construction can be made, homes will not appreciate above the general inflation level. We have owned the same house, bought new, since 2008. I hope to never buy another house again, and we are in a hot housing market (Nashville) where there IS high demand. Still, I don’t see the gains so far as significant, on a compounded basis.
    FinancePatriot recently posted…Livin’ life on the frugal edge- My work lunch strategyMy Profile

    • Thanks for sharing FinancePatriot!!! You are absolutely right. As long as houses keep getting put on the market, that will definitely affect the appreciation. Definitely not an investment I’m willing to make 🙂

  29. Actually treating home as an investment depends upon my situation, if I am in a place for a job which may not last longer, I may prefer to rent or buy a property to live and rent out later when I have to leave the place. When it comes to living in a place for a long time till death then I will have a house for myself only.
    Ron Pickle recently posted…Keller Roofing CompanyMy Profile

    • Thanks for sharing Ron!!! I personally look at a home as a forced savings account since I probably won’t take the money out of it. But it’s definitely nice to have available 🙂

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