Think Buying A House Will Make You Rich? Part 1
The median home equity for households aged 55-64 increased from $130K in 1989 to $200K in 2022, but many households lack retirement savings. The US government subsidizes mortgages through policies like the mortgage interest deduction and FHA insurance.
The median value of a home minus the mortgage for households aged 55-64 was $130K in 1989 and $200K in 2022. However, many households lack retirement savings, with 28% not owning a house and 57% having no retirement account or empty accounts. The US government subsidizes mortgages through the mortgage interest deduction, FHA insurance, and government-sponsored enterprises like Fannie Mae and Freddie Mac. These policies lower interest rates, reduce down payments, and spread repayments over 30 years. The FHA was created in 1934 to boost the construction industry and help banks survive. The combined effect of these policies translates to a 0.5 to 1.5 percentage point reduction in borrowing costs. Homeownership provides stability and forced savings, but may not be an effective way to build retirement wealth.
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