Lessons from Over 30 Years of Buy Versus Rent Decisions: Is the American Dream Always Wise?

Real Estate Economics, June 2012

Posted: 19 Apr 2011  

Eli Beracha

Florida International University

Ken H. Johnson

Florida Atlantic University - Finance

Multiple version iconThere are 2 versions of this paper

Date Written: April 18, 2011

Abstract

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

Suggested Citation

Beracha, Eli and Johnson, Ken H., Lessons from Over 30 Years of Buy Versus Rent Decisions: Is the American Dream Always Wise? (April 18, 2011). Real Estate Economics, June 2012. Available at SSRN: https://ssrn.com/abstract=1814227

Eli Beracha

Florida International University ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Ken H. Johnson (Contact Author)

Florida Atlantic University - Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

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