Findings of the Florida Atlantic University, Florida International University, and University of Wyoming probe published in the Journal of Housing Research revealed households through their own actions have more control over their overall wealth than do uncontrollable market variables.
“When considering buying and building wealth through equity appreciation versus renting and reinvesting in a portfolio of stocks and bonds, property appreciation does not change the results,” Ken Johnson, the study’s co-author and a real estate economist at FAU’s College of Business, said. “On average, renting and reinvesting wins in terms of wealth creation regardless of property appreciation, because property appreciation is highly correlated with gains in the traditional financial asset classes of stocks and bonds.”
Authors said any gains from property appreciation have been historically offset by greater gains in the stock and bond markets.
“The American Dream is alive and well but in need of revision,” Johnson said. “To that end, we suggest not all but most should own rather than rent due to ownership’s embedded commitment to save. Owning real estate should be sold as a strategy to create better set of risk-adjusted returns rather than create wealth alone.”