For God knows how many years, it’s been government policy to encourage home ownership; Your Humble Narrator himself with his indifferent 647 credit score got a boost from a state program way back in 2003. This is not, however, a wholly enlightened policy:
For people trying to rise in their economic status, there are a lot of things wrong with home ownership. The most important is that it limits geographic flexibility. Home owners have much higher costs to pick up and move, making it harder and less likely to exploit opportunities for better work and/or lower living costs in other parts of the country. And as someone who just had an $8000 air conditioning unit fail in 110 degree heat, I can testify that home ownership also involves more risk of large unexpected expenses than does renting. All things considered, in a free market, there are a lot of reasons home ownership might be a bad idea for folks trying to rise in income.
The complicating factor, as usual, is it is not a free market. Public policy has tipped the scales such that home ownership has become probably the most important of all middle class savings vehicles. Part of this is a human behavioral issue — people contribute to homes every month because the bank makes damn sure that they do so (sort of like having a really tough personal trainer). No other savings vehicle has such strong incentives not to cheat on monthly contributions. But even so homes would still not be such a great investment vehicle. In a 30 year mortgage, the percentage of your monthly payment in the early years that goes to equity is trivial. There is really no reason that a home should be anything more than a depreciating asset, like a car or a boat.
That said, dozens of people show up on question boards to ask “What new car can I buy which is guaranteed to appreciate?” And they resent being told that you lose 15 percent as you drive it off the lot.
And admittedly, my current credit score is in the 800s. Making sixteen years’ worth of payments on time probably helped.