A distressed woman surrounded by moving boxes.

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Homeownership is not the right financial move for everyone. Here’s why.

Key points

  • Some experts say the true path to riches is renting rather than buying.
  • Buying a home should never interfere with your dreams.

For some people, owning a home is a dream come true, a place to call their own and decorate in a way that reflects who they are. For others, homeownership is an albatross, a burden that prevents them from doing things they want to do. If you feel pressured to become a homeowner (or to keep the home you already own), here are four reasons you don’t have to.

1. You and your situation are unique

Just because more than six out of 10 adults in the U.S. own a home doesn’t mean you have to. You’re not just like everyone else, and there’s no reason to enter into a committed relationship with a mortgage company if the idea does not make your heart sing.

If you loathe the idea of being tied down to one place, avoid it. Let’s say you work remotely and have always dreamed of moving from one foreign country to another. Owning a home in the U.S. that requires maintenance and management could get in the way of that dream.

Or, if you’re always busy, coming home to a lawn that’s freshly mowed by someone else is a nice reminder that renting has its perks. That’s particularly true if the relative freedom of renting makes you happier, and leaves more time to do the things you want to do.

2. You may be surprised by the actual cost

The global pandemic ushered some odd quirks into home-buying, like a growing number of people willing to waive a home inspection. Unless they are home inspectors or contractors themselves, chances are they walked into a new home blind to some of its problems.

Another reason for not buying a house is the cost of maintenance. Financial experts say you can expect to spend between 1% and 4% of a home’s value annually on maintenance issues. So, if your house costs $300,000, that means you’re likely to need somewhere between $3,000 and $12,000 extra to put into maintenance. When we refer to maintenance, we mean issues like:

  • Having appliances serviced
  • Lawn-care
  • Power-washing
  • Cleaning gutters
  • Replacing filters
  • Cleaning carpets
  • Refinishing floors
  • Professional window cleaning
  • Care of pools, spas, ponds, and other outdoor features

You’ll notice that none of these are major home repairs. That 1% to 4% does not include major repairs, like replacing a furnace or a damaged roof. It does not include remediating mold issues, replacing wood rot, or tackling leaks in a basement. Those expenses stand on their own. The best way to deal with major expenses is to put money away each month to cover them as they arise.

Read more: The Real Cost of Renting vs. Owning – What Does It Cost to Buy?

3. You could end up wealthier by not owning a home

Despite the common wisdom that homeownership puts you on the road to riches, a joint 2017 study conducted by Florida Atlantic University, Florida International University, and the University of Wyoming found otherwise.

The study found that, regardless of how much a property increases in value, renting and reinvesting builds more wealth on average. To test that finding, we took a look at the housing market since 1972 and compared it to stock market returns since 1972. Here’s what we found:

  • Between 1972 and 2021, housing prices increased an average of 4.08% annually. Every dollar spent buying a house in 1972 would be worth $7.10 today. So, a home purchased then for $100,000 would be worth around $710,000.
  • Over the same 49-year period, the return on stock market investment averaged 10.95% per year. Adjusted for inflation, that’s 6.80%. So $1 invested in 1972 would be worth over $25 today. That means an investment of $100,000 in the stock market in 1972 would be worth around $2.5 million today, after inflation.

These assumptions don’t take several factors into account. For example, they don’t factor in how much was spent buying and maintaining a home, or the tax savings enjoyed by homeowners.

Still, as the joint 2017 study found, the stock market provides a more direct path to wealth than buying a house when all is said and done.

4. What you want matters

Ultimately, it’s what you want that matters. Why spend your life doing what makes other people happy, or what others believe you should do? You get to write the script.

If the idea of buying a home gives you the good kind of butterflies, and laying your head in a place you call your own is important, here’s a step-by-step guide to making it happen. But to help build wealth, find a way to harness the power of compound interest through investing. One way is to wait until you have a large down payment, buy below your means, and invest the difference.

And if you decide not to buy a house, use any money you save not being a homeowner to invest. While it may be tough to see the benefits of moving money from your bank account to investments right now, you will surely thank yourself one day.

A historic opportunity to potentially save thousands on your mortgage

Chances are, interest rates won’t stay put at multi-decade lows for much longer. That’s why taking action today is crucial, whether you’re wanting to refinance and cut your mortgage payment or you’re ready to pull the trigger on a new home purchase. 

The Ascent’s in-house mortgages expert recommends this company to find a low rate – and in fact he used them himself to refi (twice!). Click here to learn more and see your rate. While it doesn’t influence our opinions of products, we do receive compensation from partners whose offers appear here. We’re on your side, always. See The Ascent’s full advertiser disclosure here.