Homeownership as Life Cycle Goldmine: Evidence from Macrohistory

Yang Bai, Shize Li and Jialu Shen

Papers from arXiv.org

Abstract: Should a household buy a home? Using data from 16 developed countries spanning 1870 to 2020, this study provides a resounding affirmative answer. Contrary to popular expert advice, homeownership enhances life cycle wealth by up to 9% and welfare by up to 23%, compared to all-equity investment strategy. Homeownership reduces wealth portfolio risk and improves wealth equality, though it comes at the cost of lower working-life wealth and curtailed financial asset holdings. Gains are heterogeneous: Low-income (high-income) households gain more in wealth (welfare), and home purchase during periods of moderately low interest rates and high housing prices maximizes these benefits.

Date: 2025-07
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