Property

“Baby boomers tell me to buy a property. Should I? ‘

In this weekly column, I’ll help you sort through financial gray areas, from marriage contracts to inheritances and more. Submit your money question here.

I am 33 years old and I live in New York. Under different circumstances, I would consider trying to buy a house or an apartment. Baby Boomers and Gen Xers will often say buy ASAP because it’s a great investment. Right now, prices seem to be keeping properties out of reach, and it’s a mad rush to believe that real estate investments are only going up. I’m confused. What’s a millennium to do? –Home Purchase Tow truck

Dear wrecker,

Just for you, and not because i also dream of owning a property someday i took a ride on zillow for a house in manhattan that is in my price range. And as my budget comes in correct below $ 10 million I couldn’t find anything. (The median selling price of homes in the borough is $ 1.1 million, per Realtor.com.)

If you are planning to move to one of the most expensive metropolises in the world, it’s time to get out of the mindset that homeownership is when you ‘got it’. This is something that I am actively unlearning as well.

The shining allure of home ownership comes from the tremendous growth in home values ​​over the past few decades. The housing market has become a real gangbuster for at least a decade: Median home prices in the United States soared 84.79% between the last quarter of 2009 and the third quarter of 2021, according to data from the Reserve federal. Compare that to the much more volatile S&P 500, which returned 307.49% over the same time frame (more on this later in this bulletin).

Homeownership is like a Rorschach test, where today’s grandparents see “a great investment” and Gen Z sees “the agony and suffering”. That’s because the real estate market in the 1950s was decidedly different from what it is today: a post-war home ownership boom, combined with racist and discriminatory lending practices that have excluded entire groups from the market, made it easier for others to profit from the growth in real estate. values ​​(and assuming that life was It’s good for everyone). But that’s not the same real estate market we live in right now. Simply put, houses cost more as a proportion of our income, making it harder than ever to gain access to the market. That said, millennial home ownership is on the rise.

Make no mistake, homeownership is good if you can adapt it. You can borrow against your home when needed, and you can live off your investment while you own it (an S&P 500 mutual fund doesn’t even come with a folding chair). But remember, you can get exposure to the housing market without buying a home: look for real estate investment trusts (REITs) and private real estate investment platforms like Fundrise if you want to diversify your portfolio further.

While we can’t be sure what will happen to the real estate market in the short or long term, history tells us that real estate is a more stable investment than the S&P 500. ascend ? I am not clairvoyant. But if the thought of buying a house in the most expensive part of the world infuriates you, let me give you permission to continue renting.

– Ryan