The NYT had an editorial discussing how unprepared most workers are for retirement. While most of the points in the piece are well-taken, it would have been worth saying a bit about homeownership, since housing equity is the main source of wealth for most middle income people.

Many families were badly burned by buying a home in the middle of the housing bubble. So-called experts who should have known better and warned people, didn't. This should have people very very angry.

However even in more normal times homeownership is not the slam dunk investment that its proponents claim. First, there are large transactions costs associated with buying and selling a home, typically around 10 percent of the purchase price. This means that anyone who cannot anticipate being in the same place for at least 5 years is almost certainly better off renting.

Even over the longer term homeownership is hardly risk free. In many areas where the economy is not diversified, if the major industry goes down, house prices will plummet with it. In this case, owning a home is sort of like putting all your savings in your employers stock. There are a lot of unemployed autoworkers in the Detroit area who have a home that is now worth $15,000-$20,000.

In short, there is a lot of silliness about homeownership that really needs to be attacked. Homeownership might be the dream of realtors, builders, and mortgage bankers, but that doesn't make it the American Dream. And remember, anyone who tells you not to worry about house prices because "you can always live in your home," is really trying to tell you that they don't have a clue what they are talking about.

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