Do People View Housing as a Good Investment and Why?

Andrew Haughwout, Haoyang Liu (), Dean Parker and Xiaohan Zhang

No 20210405b, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Housing represents the largest asset owned by most households and is a major means of wealth accumulation, particularly for the middle class. Yet there is limited understanding of how households view housing as an investment relative to financial assets, in part because of their differences beyond the usual risk and return trade-off. Housing offers households an accessible source of leverage and a commitment device for saving through an amortization schedule. For an owner-occupied residence, it also provides stability and hedges for rising housing costs. On the other hand, housing is much less liquid than financial assets and it also requires more time to manage. In this post, we use data from our just released SCE Housing Survey to answer several questions about how households view this choice: Do households view housing as a good investment choice in comparison to financial assets, such as stocks? Are there cross-sectional differences in preferences for housing as an investment? What are the factors households consider when making an investment choice between housing and financial assets?

Keywords: housing; homeownership; financial assets (search for similar items in EconPapers)
JEL-codes: D14 G11 G21 (search for similar items in EconPapers)
Date: 2021-04-05
New Economics Papers: this item is included in nep-cwa and nep-ure
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Working Paper: Do People View Housing as a Good Investment and Why? (2021)
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