What happens if you never buy a house? What -2-

"That's probably the most important channel through which buying a home builds wealth," said James Choi, a professor of finance at the Yale School of Management, who has challenged traditional personal-finance advice in his research.

The earlier someone becomes a homeowner, the more equity they may be able to accumulate in their home by retirement, assuming about average annual appreciation. They can also end up with significantly lower housing costs at a time when they might have a fixed income. Take a 30-year-old who buys a home for $405,400 - around the median price in the U.S. - using a 30-year mortgage. By the time that person turns 65, they will have nearly $1.6 million in home equity and no monthly mortgage payment, according to a calculator developed by Zandi. But if they wait until age 40 to buy that house - an increasingly common scenario - their housing wealth will be slightly more than $1 million at 65 and they'll still be making mortgage payments. And if they buy at age 45, they'll have $888,281 in equity when they're 65 and will be on the hook for monthly payments for the first 10 years of retirement.

These calculations assume a 6.1% mortgage rate, a 20% down payment and a 4% annual home appreciation rate.

People who are priced out of buying a home can still build wealth without owning one. In many of these scenarios, someone who rents for decades actually comes out ahead, wealthwise, if they're able to invest a relatively significant sum - about $800 a month in the early years of building their portfolio, according to Zandi's calculator. That assumes an 8% annual stock-market return and 3% annual rent increases.

"It's not clear that there's this huge financial advantage to owning a home if you are saving outside of the home," Choi said.

Caleb Pepperday is a financial planner who works with clients who are largely between 30 and 50 years old and are physician assistants. Many of them own homes, but he says the ones that don't aren't necessarily rushing to buy. In some cases, they're seeing that home prices and interest rates are so high that investing in a house doesn't feel worth it right now. In the meantime, these clients are saving in buckets outside of retirement accounts to give themselves the option to use that money to buy a home at some point - or simply to continue to build wealth.

Caleb Pepperday has experience as a homeowner - but for now, he's renting.

Pepperday has personal experience with both arrangements. He and his wife owned a home in Pittsburgh and lived there for two years, then sold it when his wife, who works as a physician assistant, was offered a job in Montana. For now, they're renting.

"We don't know how long we're going to stay here, so we didn't want to lock up money in a house," he said.

For clients who are renting, Pepperday looks for ways to help them put their money to work besides investing in a house.

"We've seen parents or grandparents use homes as the way to build wealth," he said. "Now there's alternatives that potentially weren't around back when my parents and my grandparents were around. People are starting to understand that buying a house isn't the only way to build wealth."

Americans have easier access to investments outside of housing than previous generations did, Zandi said - pointing to the popularization of index funds launched in the 1970s and automatic 401(k) contributions. "The stock market is just a much bigger market, just a much more liquid market" than it used to be, he noted.

But an investor who is relying on the stock market to build wealth needs the psychological fortitude to keep putting money into the market, even during a downturn, he added. "Investing in housing is much more straightforward," Zandi said.

Some younger homeowners and renters challenge the idea that a home should be their primary asset.

Jesse Beeler first became a homeowner when he was 23 years old, and since then, he has sold that house and bought another one. Still, Beeler - who lives in Greencastle, a small city in the south-central part of Pennsylvania - said he might have chosen to rent if he lived in a different location with a more robust rental market, and if he hadn't internalized the financial advice of his parents' generation when he was in his early 20s.

"I don't know if the rewards of owning a home match the risk profile of today's economy," said Beeler, who is now 30. "It's kind of an investment that you can't really get to without either borrowing against it or selling, which then upends your life. For me, it just doesn't feel like it's liquid enough."

For Jesse Beeler and his wife, there are benefits to homeownership, including the opportunity to increase the value of their home by renovating the kitchen and doing other projects. But he's skeptical owning a home can be a reliable source of wealth.

Given today's relatively high interest rates, Beeler, who works in supply-chain finance, said he feels like he's paying a premium to the bank to own his home, although he recognizes there are benefits to owning. He and his wife, who is a teacher, were able to buy a place that's close to family and to the school where she works. They also have the opportunity to increase the value of their home by renovating the kitchen and doing other projects.

Nonetheless, he's skeptical that owning a home can be a reliable source of wealth, and when he looks at retirement projections, he doesn't factor in his home. The idea - prominent among his parents' generation - that you need to own a home to achieve financial independence is "pretty flawed," he said. "It was passed heavily on to me."

Still want to buy a home? It might get easier.

For many, though, the desire to own a home isn't all about building the biggest nest egg. Instead, it's about stability, being part of a community or getting access to a particular type of housing.

"The types of things that are available to buy are different from the types of homes that are available to rent," said Choi. Though developers are building more single-family homes specifically as rentals, that kind of housing stock is typically more readily available to buyers. And if you want to be able to make changes to your living space over time and you plan to stay in the same location long term, buying can make sense.

The tax code provides some advantages to homeowners, and a mortgage allows buyers to own a large asset with a relatively small initial investment. Though the total annual cost of homeownership has become more difficult for buyers to predict in recent years, given rising insurance premiums and property taxes, owning a home with a fixed-rate mortgage can help stabilize your housing costs.

And in a period of high inflation, like the one we're living through now, a 30-year fixed-rate mortgage can act as an inflation hedge. As prices broadly go up, your payment can, over time, feel like less of a burden. For example, the median mortgage payment for homeowners who moved in 2024 and 2025 was $2,300, according to the Federal Reserve. After 10 years, that $2,300 will feel like about $1,700 today, assuming a 3% rate of inflation.

And although we're living through a historically challenging period to purchase a home, the good news is that there are signs it may get easier. Because prices are so high right now, there's little room for them to keep growing, according to Zandi.

"You could get affordability restored not because you have more supply, but less demand," he said, noting that it's "almost a demographic certainty as you move into the 2030s." The drop in U.S. immigration is likely to dampen demand for homes, according to Zandi, while the declining birth rate, coupled with aging baby boomers who will be letting go of their homes in the coming years, could also play a role in decreasing demand.

For years, Zandi has been saying some version of the line that, for most people, renting makes more sense than buying a home. But as the years go by and the demographic realities start to change, he thinks he may be saying that with less and less confidence, until it's no longer true.

In Los Angeles, Saunders says it's hard to imagine that future, at least for now. When she looks around at her peers, most are renting or living with their parents. Many, like her, are struggling to keep up with the expenses of daily living, let alone setting aside enough money to invest in an asset like a home.

Sometimes, Saunders wonders whether the path she followed - go to college, get a job - would have led to her owning a home if she'd come of age in a different generation.

"I had to quell those desires for homeownership as I continue to see the price of everything grow exponentially," she said.

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-Jillian Berman

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