Renting vs. owning: which is better as an investment?

Is homeownership the right thing for everybody? Absolutely not. Is it the right thing for some households who are currently renting? Absolutely. Should every renter be looking for the first opportunity to buy a home? No.

This is all logical. Yet, there's propaganda that suggests that everybody who does rent is subjected to some sort of subliminal or explicit pressure to belly-up to the homeownership bar. Here, Marketwatch staffer Maria LaMagna reports on a George Mason University economist, Alex Tabarrok, who's campaigning for a re-look at the financial and economic value of homeownership in ways that might increasingly favor renting over owning, at least as a financial investment. LaMagna writes on a new paper from Tabarrok:

“First, it’s not good to have a significant share of your wealth locked into a single asset,” he wrote. “Diversification is better and it’s easier to diversify with stocks. Second, unless you are renting the basement, houses don’t pay dividends. Stocks do. You can hope that your house will accumulate in value but don’t count on it. Indeed, you should expect that as an investment your house will appreciate less than does the stock market.”

Tabarrok may or may not have an opinion on the "forced-savings" aspect of ownership.

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