Don't Bet on Building Wealth by Buying a House

By: Ann Binlot
Topics: Housing Crisis ,; Investing ,; Real Estate ,; Retirement

The number of buyers who signed contracts to purchase homes dropped in May to the lowest level on record, a sign the housing recovery can't survive without government incentives.

(Credit: AP Photo/Charles Krupa)

Before the Great Recession, Americans looked forward to the day when they would purchase their first home. The ultimate symbol of success — home ownership kept the U.S. economy going. It meant having shelter over your family's heads, a nest egg, a way to fund your children's education, vacations — but sadly, that's no longer the case.

The New York Times reports that more than likely, that era is gone for good. When the economy collapsed, homeowners saw values depreciate at a pace like never before. Homes went into foreclosure, and with that their owners dreams collapsed as well.

"There is no iron law that real estate must appreciate," Stan Humphries, chief economist for the real estate site Zillow told the New York Times. "All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn't hold up."

Instead of appreciating as they did in decades past, real estate values will only rise to keep up with inflation. So if you're looking for a sure fire way to make money, don't bet on buying a house. It won't do anything for your future but provide a roof over your head.

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by awfrey October 20, 2010 5:18 PM EDT: Check out Ken Fisher?s latest book: Debunkery: Learn It, Do It, and Profit From It. I work for Fisher Investments, and our firm believes in challenging conventional wisdom when it comes to investing. More information on Ken Fisher?s Debunkery at the official site: http://www.ken-fisher-debunkery.com; Reply to this comment


by jgg000101 September 15, 2010 8:05 PM EDT: this article is pure propaganda. Owning real estate will always be a good investment. Are there cycles? Of course. Are some properties more valuable and others more risky? Yes. This article is attempts to reprogram a mindset that "owning property" is something to be avoided if you are in the position and qualified to make an investment. Pure BS. The only thing this article accomplishes is make people who can't afford a house or qualify for a loan feel better.; Reply to this comment


by tsigili August 25, 2010 10:14 AM EDT: It never was, a path to wealth. It was simply one form of modest saving, over time, to help in retirement.

Now housing costs are so high, that it is no longer effective.; Reply to this comment


by rwsmith29456 August 24, 2010 11:18 PM EDT: IF you can afford a house you are at least paying for something that will have value and will build equity. But I agree with the other peeps on this board. Plan to live in it. There was a time when people 'traded up' every few years but you shouldn't go overboard and buy a house you can't afford. Not only will you lose your equity, you will lose your rear end.; Reply to this comment


by TDomijan August 24, 2010 2:44 PM EDT: Really? What next, buy high and sell low!; Reply to this comment


by renonv5 August 24, 2010 10:01 AM EDT: This article is totally bogus.; Reply to this comment


by wyodutch August 24, 2010 9:49 AM EDT: GREAT NEWS!!!!!!
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Now that American wages have been driven down to third-world levels... the Greedy corporations are coming back from red china!!!
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A report by Credit Suisse said the vast majority of US and European companies in China are expecting a "margin hit" over the next 12 months and fear they will not be able to pass on the costs to consumers, with the biggest worrries in electronics, clothing, and retail.
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The bank said Footlocker, Liz Claiborne, and Office Depot would tip into outright loss in a worst-case scenario, defined as a 20pc rise in costs without any pass-through to customers.
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Reliance on Chinese plants is suddenly proving double-edged. "We conclude that labour and transportation cost pressures are a major concern for executives that may be under-appreciated by investors," it said.
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The US industrial giant General Electric raised eyebrows in May with plans to shift production of its hybrid water heater from China back to Kentucky next year after securing lower wages from US workers. The company cited the narrowing pay gap, lower transport costs, and shorter delivery times."
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See? The investor class has successfully screwed the working class once again. Great news for Wall Street.; Reply to this comment


by nyc_logic August 24, 2010 9:35 AM EDT: This article is so inaccurate that I don't know why it was even published. There are still people making money flipping houses in this market because they have tons of forclosures to choose from that they are getting for next to nothing, and they are experienced. But the days of the first-time flippers ARE over. People who try to flip real estate without experience will lose their shirt. If you bought a property before the real estate bubble began, your home is most likely still worth more than you paid for it. If you bought at the hieght of the market, then you probably owe more than what your place is worth. Zillow is a horrible website for real estate. Realtors avoid Zillow like the plague because the site contains outdated information about sales, prices, taxes and anything else you can think of. Do not use zillow to get comparable pricing for your home because it will always be WAAAaaaay off the mark. Get a professional estimator to find out the value of your home, or even a realtor, they are always more accurate than Zillow and a realtor will do it for free.; Reply to this comment


by wyodutch August 24, 2010 9:22 AM EDT: Well, son-of-a-gun!
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Look at what some great Americans are doing to get the American economy moving again... They're building apartments in red china!
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"DALIAN, Aug 24, 2010 (SinoCast Daily Business Beat via COMTEX) --
The Blackstone Group L.P. (NYSE: BX) has reached a cooperative agreement with Great Eagle Holdings Ltd., one of the biggest property and hotel companies in Hong Kong, said sources.
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Under terms of the agreement, the US private equity giant will fund a residential project, including over 1,000 high-end apartments and more than 400 hotel guest rooms, the latter plans to develop in Dalian, Liaoning Province. Dalian, an important trade and financial center in China, is scarce in land resource. In addition, it is a renowned tourist destination. So the housing price there is relatively higher than those in the surroundings."
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(Ain't the fat-lipped, greedy investment bankers a swell bunch of folks?)
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"Three years ago, they said the investment bank was dead. I guess, we weren't listening," crowed Blackstone Group Chairman Stephen Schwarzman in a champagne toast to his 300 black-tie guests, including Senators Hillary Clinton and Charles Schumer, and New York City Mayor John Thain.
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Blackstone's rise from successful private-equity shop to global investment-banking powerhouse in a little more than 10 years is now the stuff of Wall Street legend.
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Ironically, it was TARP, the troubled-asset relief program approved by Congress in October 2008, that breathed new life into the investment-banking model. "It was like the second Gold Rush." "The $700 billion program created a huge new market for distressed securities."
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Now... let's all get out there and complain about the greedy, overpaid, lazy American blue-collar worker.; Reply to this comment


by cjs_cnet_xyz August 24, 2010 3:46 AM EDT: Is this article trying to soothe the public that it does not need a home? I'll bet the crooks on Wall Street that instigated this short of the public's home equity still have their homes. Even most people that had a lot of equity in their homes still have their homes. Who doesn't have a home anymore? Mostly a generation of people that could not get equity and could not retain their jobs in this market. The finance industry should be ashamed for creating a situation by which most of America will hate them for a generation. May the government foreclose upon all of Wall Street and lock up these crooks for what they are.; Reply to this comment