Your Home, Your Retirement Account? Think Again

Monday’s Wall Street Journal attempts at length to answer that eternal question: Why isn’t my home that great an investment? The short answer: Homes are rarely as good an investment as the popular imagination assumes. The longer answer: Homes can be a good investment, but there’s a lot of variables.

New York City homeowners have an advantage over a lot of their American brethren. Homes here tend to appreciate in value faster. Still, think of the property taxes, the renovations, the insurance, the maintenance costs if it’s a condo or a co-op–you get the picture. No matter what sort of homeowner you are, you face uncertainties if you treat your home as some sort of retirement account or investment:

For the grasshoppers, there’s nothing quite as stupid as paying off your 2002 trip to Orlando in 2032, when you finally settle up your refinanced “cash out” 30-year mortgage. And for the ants, economic studies have demonstrated over and over that houses (1) cost more than most people make when they sell and (2) rarely match the long-term returns of stocks or other investments.

Anyone up for renting?

- Tom Acitelli