In my generation, if you didn’t own a home by your late 20s, you were almost considered a failure – or at least a bit out of sync with the majority. Many of the younger generation now are choosing to rent and invest their cash instead. There are pros and cons for both choices.
Owning your home remains part of the American psyche, representing stability and independence. Living in the same home for 20 years and watching it appreciate in value is still an effective way to accumulate wealth, but it does not necessarily fit the profile of this homeowner generation.
Once you put all your cash in a home, it’s a lot more difficult to relocate for professional opportunity, or just personal freedom. If you put your cash in investments and rent, you have a certain amount of freedom and independence that your parents and grandparents didn’t crave, but you risk losing it if the stock market goes south, as it did during the global financial crisis in 2007.
According to the Case-Shiller Index, the past decade has been a relatively good one for homeownership. Home prices increased by about 87% from December 2015 through December 2025. However, if you had invested elsewhere, such as in an S&P 500 account, a pretty safe investment option, your investment would have increased by about 235%, not counting dividends.
However, it’s more than a simple math problem because most homeowners don’t pay cash; they borrow the majority of the purchase price through a mortgage. Therefore, if you put down 20% on the purchase of the home and the home appreciates 10%, you have earned a 50% return on your initial equity.
In addition, you have a home to live in, no rent to pay, generous tax deductions depending on the state you live in and don’t discount the pride of ownership, part of the American dream. True, depending on your lifestyle, family obligations and employment status, your primary asset can hold you back.
This is especially true in a buyer’s market that most of the country has been going through for several years. If you need to sell in a hurry, the theory of renting compared with owning looks better and better. This could really be the reason we have an oversupply of potential homeowners who aren’t pulling the trigger and letting their cash sit in Wall Street accounts.
So, which is the better investment? It may be possible to have it both ways. Purchase a home with the minimum down you can qualify for and invest the balance of your savings. It’s a way of not keeping all your eggs in one basket, assuming you have enough eggs to make it work.
Renting when you’re young and without family obligations can be one of the best times of your life; it was for me. I was in love with my one-bedroom, 500-square-foot walk-up on the East Side of Manhattan. Eventually, you have to grow up, and buying a home is an important first step and well worth the risk.
