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A Revision of the American Dream of Homeownership

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  • Eli Beracha
  • Alexandre Skiba
  • Ken H. Johnson

Abstract

It is well accepted that homeowners, on average, have greater total wealth than renters. However, Beracha and Johnson (2012) show that in a strict “horserace” comparison, renting creates higher wealth than ownership in the majority of cases. In this paper, we revisit Beracha and Johnson's buy versus rent model to investigate factors affecting the wealth outcomes of the buy versus rent decision. Three key findings emerge: (1) the difference in wealth between renting and owning can be most affected by choices within the scope of the individual rather than through the impact of exogenous market variables; (2) households that fail to reinvest buy-rent cash flow differentials accumulate less wealth; and (3) property appreciation plays only a minor role in the results.

Suggested Citation

  • Eli Beracha & Alexandre Skiba & Ken H. Johnson, 2017. "A Revision of the American Dream of Homeownership," Journal of Housing Research, Taylor & Francis Journals, vol. 26(1), pages 1-25, January.
    • Handle: RePEc:taf:rjrhxx:v:26:y:2017:i:1:p:1-25
    DOI: 10.1080/10835547.2017.12092125
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