I attended a very interesting lecture a few months back hosted by Ryerson’s Centre for Urban Research on how changing demographic and economic trends and preferences will reshape America’s metropolitan areas. The key presenter at the event was Dr. Arthur C. Nelson, a Professor of Planning & Real Estate Development at University of Arizona. You can view his entire presentation here.
There are a number of fascinating pieces in Arthur’s presentation; but what stood out for me were the two charts that show historic homeownership rates (from 1964) and median household income (from 1984) in the United States. Specifically, I couldn’t help but notice how correlated both variables seemed with one another, and I began wondering whether higher homeownership levels can result in higher incomes.
Although I support home ownership and the sense of security it brings, and I believe it is a great way to build equity, I certainly do not think it is the one and only “tried and tested” way to prosperity. I think there are a number of great methods to build equity that do not involve buying a house. And as I’ve written previously, a home should not be confused as an investment vehicle (unless that is the intent). Recent rapid price appreciation of homes in Canada is sending the wrong message about what homes are and should be. Most importantly, a home is a home, and everyone needs a place to live.
I made the chart shown below using the data sources referenced in the presentation (and at the end of this article). And just by looking at how closely the two variables follow one another, it makes me think of the old adage – owners are getting richer, while renters are getting poorer. I guess there might still be some “stigma” associated with renting.
Median Income- https://fred.stlouisfed.org/series/MEHOINUSA672N#0
Homeownership Rates- https://fred.stlouisfed.org/series/RHORUSQ156N