The conventional wisdom says that homeownership, rather than renting, is the smart path toward wealth creation. But this has been upended by a new study released Thursday that suggests renters who invest wisely in stocks and bonds may be poised for more lucrative profits down the road.

The study, “A Revision of the American Dream of Home Ownership,” published in the Journal of Housing Research, doesn’t totally undermine the idea that buying property is good for longterm wealth generation.

However, it found that property appreciation on its own is not the wealth boon many of us are conditioned to believe. Instead, the paper discovered that a homeowner’s commitment to put away savings for the inevitable downpayment on property—rather than future equity appreciation of said property—is the stronger factor in why homeowners tend to accumulate wealth faster than renters.

“Society appears to have been telling people the right thing to do (own a home) but for the wrong reason,” write the study’s authors. “More specifically, it appears that homeownership forces saving and when combined with the tendency of households to remain homeowners once they initially switch to ownership explains why owners have more wealth.”

Individuals have more control over their overall wealth through the wise investment of stocks and bonds than they do uncontrollable housing market variables—thus any gains from property appreciation tend to be offset by the stock and bond markets, the study found. The authors surmise that a renter who invests in the market could out perform a homeowner who doesn’t.

“When you assume that those monies are reinvested at a rate of return, renting, on average, wins in terms of wealth creation,” write the study’s authors, Eli Beracha, Alexandre Skiba, and Ken Johnson, faculty members of Florida International University, the University of Wyoming and Florida Atlantic University, respectively.

“The American Dream is alive and well but in need of revision,” Johnson added. “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.”

Email Jotham Sederstrom

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×