Homeownership as a Life Cycle Goldmine: Evidence from Macrohistory

Yang Bai, Shize Li and Jialu Shen

Papers from arXiv.org

Abstract: Should households buy their homes? Contrary to popular personal-finance and academic expert advice, our block-bootstrap life-cycle simulation suggests they should. Using 150 years of data across 16 countries, we find that homeownership raises wealth and consumption-equivalent welfare relative to saving-rate-matched benchmark strategies investing solely in financial assets. The gains come from lower portfolio risk, rent-risk hedging, access to home equity late in life for enhanced retirement consumption, and higher bequests. The gains vary with income, house-price conditions at purchase, and mortgage rates. Mortgages enable early homeownership access at the cost of lower liquidity and consumption-equivalent welfare.

Date: 2025-07, Revised 2026-09
New Economics Papers: this item is included in nep-fdg and nep-ure
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