Homeownership by itself is not useful, but it does promote saving. For the average family, a home is the most expensive thing they will ever save for. After 10 years in that mortgage, they'll have significant equity that they probably wouldn't have otherwise had.
Is it a risk and possibly a poor choice to own a house? Versus other investments, possibly. Versus consumption and other disposable income spending, absolutely not. There a lot of people that could do better if there were more knowledgeable about ways to save capital, but it the absence of the knowledge, owning a home is not a bad default.
This is one of the most important points : the enforced savings plan and relatively illiquid asset. For many people, the enforced discipline of putting money away by paying down their principal pays off for them. Of course you can refinance or trade homes every 5 years and get nowhere. But if you stay put for a long period of time, buy wisely in the first place, and maintain the property, it will pay off. Well placed property is uniquely inflation proof because it normally contains intrinsic value.
You can achieve the same thing by renting and regularly putting a portion of your income away into quality assets : but the temptation to liquidate part of your portfolio always will remain strong. This is where people come unstuck.
The danger is in this advice/thought process being taken to apply to all property, regardless of location. I can foresee far-flung suburbs with long commutes continually falling in value as people factor in the cost of transport to their overall living costs.
The government should exit the property incentive market. No tax deductibility for renting or buying. No incentives or guarantees for high-risk mortgages. Let the free will of the people decide what is the best for them. The only laws in place should govern the quality of the property, and against unfair eviction/foreclosure. And there should be laws in place to allow for longer term tenancies. On any commercial property, it's easy to get 10-12 year leases on a property. It's rare to get more than a 12 month lease on a rental property : probably precisely because it's easier to evict a commercial tenant than a residential tenant. The more government controls are put on tenancies, the worse the overall effect for tenants (like rent control, which results in a good deal for a few tenants, and a bad deal for most)
If you could sign a 10-year lease on a house and be allowed to modify the interior (paint, floorcoverings, etc) then the merits of onwnership vs renting could be more equally compared.
Homeownership by itself is not useful, but it does promote saving. For the average family, a home is the most expensive thing they will ever save for. After 10 years in that mortgage, they'll have significant equity that they probably wouldn't have otherwise had
Does it? This presumes that for those entire 10 years, the family never refinanced the house, and never used that refinancing to pull equity out. I don't have any statistics in front of me, but given as big a market as there was for refinance deals, I imagine the number of homes being cash-out refinanced was nowhere near negligible. I can imagine the temptation was quite large for anyone not independently wealthy, but wanting to live the good life anyway.
Does anyone have a source for numbers of homes refinanced out of all possible homes in the past 10 years? Even more interesting to me would be statistics on the amount that tended to be cashed out in said transactions.
Is it a risk and possibly a poor choice to own a house? Versus other investments, possibly. Versus consumption and other disposable income spending, absolutely not. There a lot of people that could do better if there were more knowledgeable about ways to save capital, but it the absence of the knowledge, owning a home is not a bad default.