Lessons from Over 30 Years of Buy Versus Rent Decisions: Is the American Dream Always Wise?
Florida International University
Ken H. Johnson
Florida International University (FIU); Florida Atlantic University - Finance
April 18, 2011
Real Estate Economics, June 2012
Home ownership is touted as the "American Dream". It is credited with enhancing wealth, increasing civic pride, improving self-esteem, crime prevention, child development, and better educational outcomes, among other benefits. This paper does not dispute any of these claims. Instead, this study hypothesizes that crowding toward homeownership raises the price of homes above their fundamental value resulting in the purchase of a home becoming a contraindicative action. After setting the holding period to the average American’s tenure in a residence, renting (not buying) proves to be the superior investment strategy over most of the study period.
Keywords: Homeownership, Renting, Buying, Rent-to-Price, Appreciation
Date posted: April 19, 2011
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