Is a house still a good investment?
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Megan Rapinoe here. This week on A Touch More, we are launching our much-anticipated book club, and we're doing it with Abby Wambach and Glennon Doyle, who will introduce their upcoming book, We Can Do Hard Things, Answers to Life's 20 Questions. Plus, we've got some fun and important updates from The W and the NWSL, and of course, we've got a new Are You a Megan or Are You a Sue? Check out the latest episode of A Touch More wherever you get your podcasts and on YouTube.
Hey, I'm Jonquan Hill and this is Explain It To Me, the show where you call 1-800-618-8545 and we find the answers to the questions that matter most to you. Miranda Hales from the Twin Cities and called in with a question that's on more than a few people's minds.
Is it worth it to buy a house? I think that's always been the go to investment for like past generations of like you buy a house and that's kind of your retirement plan. And that just doesn't seem realistic or even attainable to buy a house. So it's like, should I even try to do it? Is that something I should do?
This is a question I've wondered about, too. OK, I'm going to be honest. I love to scroll through real estate websites. But should we be buying homes? Given the economy and the interest rates, it can often feel like a fantasy. The market is just so much more different than it was when our parents were looking for starter homes. Is this really where our money should be going? To get an answer, I called up James Rodriguez, senior real estate reporter at Business Insider. Do you ever just like scroll through Zillow dreaming of what it would be like to own your own home or am I telling on myself?
Not at all. I do that all the time.
So the conventional wisdom is that buying a home is the way to build wealth in here in America. Is that true? Has that ever been true?
Definitely with past generations, and I think especially has this hold on people today when they've seen, especially baby boomers who may have bought homes decades ago and have reaped all the rewards from this really crazy moment in the housing market where prices jumped so substantially during the pandemic. If you compare the end of 2019 to the beginning of this year, home prices are up about 50%. So historically, we have seen people invest a lot in their homes. And for some people, it is absolutely true that they have reaped substantial rewards. I think it's important to look closer at that, though, and see that for some people, it has been really perilous. There have been periods of home price declines. We saw this during the great financial crisis in 2008, when some people were lost all the money that they had put into their homes because of the foreclosure crisis. And so I think it's important to recognize that while that has been true for some people, it hasn't been true for everyone. And it may not be something that's true in the future.
Yeah, I want to talk a little bit about why that conventional wisdom around home buying and building wealth isn't hitting quite like it used to. What's different for today's homebuyers? Hmm.
I think we just see the affordability aspect. People are stretched so thin budget-wise.
The majority of middle-class Americans say that they are struggling financially.
Their financial stress has increased since before the COVID-19 pandemic began. So when you look at inflation, economic instability, a lack of savings, all of these have increased the share of Americans feeling financially stressed.
Mortgage rates, they went super low during the pandemic. They were at record lows and that allowed people to get in because even if prices were rising, the rate on their loan was so low that you could kind of stomach the monthly payments and make it work. Whereas now we've seen mortgage rates rise to more than double those levels. And home prices haven't really stopped climbing, especially in areas where there's still not a lot of homes on the market. There's uncertainty around just the future of the economy. Interest rates are up. So all of that together really makes it hard to see a future in which people who are already stretched thin renting, how do you save up money for a down payment?
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