Is a house still a good investment?

Summary

Podcast Summary: Today, Explained - "Is a House Still a Good Investment?"

Episode Details:

• Title: Is a House Still a Good Investment?
• Host/Author: Vox
• Release Date: April 6, 2025
• Hosts: Sean Rameswaram and Noel King

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Introduction

In this episode of Today, Explained, Vox delves into the enduring question of whether purchasing a home remains a sound investment in the current economic and environmental landscape. Host Jaclyn Hill engages with experts and real estate professionals to unpack the complexities surrounding homeownership, especially for younger generations grappling with financial uncertainties and the looming impacts of climate change.

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Historical Perspective on Homeownership and Wealth Building

Conventional Wisdom vs. Reality

Jaclyn Hill opens the discussion by addressing the long-held belief that buying a home is the quintessential path to building wealth in America. She questions whether this notion, which has served previous generations well, still holds true today.

Jaclyn Hill (01:47): "The conventional wisdom is that buying a home is the way to build wealth here in America. Has that ever been true?"

Expert Insight

James Rodriguez, a senior real estate reporter at Business Insider, concurs that homeownership has historically been a significant wealth-building tool, particularly for past generations.

James Rodriguez (02:40): "Definitely with past generations... people who bought homes decades ago have reaped substantial rewards, especially during the housing market boom following the pandemic, where prices surged by about 50% from the end of 2019 to early this year."

However, Rodriguez cautions that this trend hasn't benefited everyone uniformly and highlights periods like the 2008 financial crisis, where many homeowners faced foreclosure and significant losses.

James Rodriguez (03:49): "While homeownership has been true for some, it hasn't been universal, and it may not continue to be a guaranteed path to wealth in the future."

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Current Challenges in the Housing Market

Affordability Crisis

The episode highlights the growing financial strain on middle-class Americans, exacerbated by rising mortgage rates and stagnant wage growth. Rodriguez explains how the drastic increase in mortgage rates—from historical lows during the pandemic to over double that figure currently—compounds the difficulty of homeownership.

James Rodriguez (04:11): "Mortgage rates went super low during the pandemic, allowing people to manage rising home prices. Now, with rates soaring and prices still climbing, especially in low-inventory areas, it's challenging for even the financially stretched to consider buying a home."

Generational Disparities

Jaclyn Hill and Rodriguez discuss how millennials and Gen Zers face unique hurdles compared to the baby boomer generation, who benefited from a booming housing market and significant home value increases over decades.

Jaclyn Hill (05:51): "Zoomers and millennials are priced out, while baby boomers are aging in place. What's keeping these younger generations out?"

James Rodriguez (05:56): "A combination of demographic shifts, insufficient housing construction post-Great Recession, and increased demand due to remote work preferences are conspiring against younger buyers."

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Impact of Climate Change on Real Estate

Climate Risk and Property Values

The conversation shifts to the influence of climate change on the housing market. Dr. Jeremy Porter, head of housing and climate research at First Street, articulates how extreme weather events and rising sea levels are altering real estate dynamics.

Dr. Jeremy Porter (13:12): "We're seeing more extreme precipitation events and severe wildfires, leading to increased property damage and higher insurance costs, which directly affect home values."

Climate Gentrification

Porter introduces the concept of "Climate Gentrification," where areas previously considered less desirable due to higher climate risks become less valuable, while safer inland regions experience a surge in demand and prices.

Dr. Jeremy Porter (17:27): "With data integration into real estate platforms, higher climate risk homes are languishing on the market longer and depreciating, while safer areas like Little Haiti in Miami have seen increased value."

Equity and Access Issues

The episode critically examines how climate-related shifts in real estate can exacerbate social inequities, as wealthier individuals can afford to relocate to safer areas, potentially displacing minority and lower-income communities.

Dr. Jeremy Porter (17:27): "Those with means can avoid climate risks, while others are left vulnerable, leading to gentrification and reduced accessibility to safe housing for disadvantaged groups."

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Steps and Considerations for Prospective Homebuyers

Evaluating Financial Readiness

Mandy Woodruff Santos, host of Brown Ambition, shares practical advice for those contemplating homeownership amidst rising costs.

Mandy Woodruff Santos (25:40): "Check your credit score, save for a down payment, and ensure you have a stable income. Avoid taking on new debt before applying for a mortgage."

She emphasizes the importance of budgeting appropriately, suggesting that housing expenses should ideally constitute 25-35% of post-tax income, though higher percentages may be realistic in high-cost areas.

Mandy Woodruff Santos (26:43): "Cap your monthly housing expenses at 25-35% of your post-tax income, or even up to 50% in high-cost regions to avoid financial strain."

Understanding Total Costs

Beyond the mortgage, prospective buyers must account for property taxes, maintenance, and potential climate-related insurance increases.

Mandy Woodruff Santos (22:19): "I didn't understand how much property taxes could be... they almost doubled the monthly cost, which was eye-opening."

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Alternatives to Homeownership for Building Wealth

Diversified Investment Strategies

For those unable or unwilling to buy a home, the hosts and guests suggest alternative avenues for building wealth, such as:

• Stock Market Investments: Investing in index funds, mutual funds, or utilizing 401(k) plans.

  Mandy Woodruff Santos (27:48): "Invest in the stock market, your 401(k), or a Roth IRA. These options offer diversification and can be more flexible compared to real estate."

• Entrepreneurship: Starting a business can potentially yield higher returns.

  Mandy Woodruff Santos (28:37): "Investing in a business idea could offer better returns than a home, depending on market conditions."

Maximizing Financial Instruments

Leveraging tax-advantaged accounts and understanding current tax benefits—or the lack thereof—for homeowners is crucial, especially post the 2017 Tax Cuts and Jobs Act.

Mandy Woodruff Santos (28:34): "The tax benefits of homeownership have diminished, making other investment vehicles more attractive."

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Conclusion

The episode concludes by reaffirming that while homeownership has traditionally been a cornerstone of wealth building in America, the landscape is rapidly changing. Financial challenges, escalating mortgage rates, limited housing inventory, and the tangible impacts of climate change are reshaping the real estate market. Prospective buyers must navigate these complexities with informed strategies, balancing dreams of homeownership with practical financial planning and exploring diversified investment options to secure their financial futures.

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Notable Quotes:

• Jaclyn Hill (02:29): "I do that all the time [scrolling through Zillow dreaming of owning a home]."

• James Rodriguez (04:11): "Mortgage rates went super low during the pandemic... now we've seen mortgage rates rise to more than double those levels."

• Dr. Jeremy Porter (15:21): "There's a lot more nuance to the decision-making process than simply avoiding homeownership because of climate risk."

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Final Thoughts

Today, Explained effectively dissects the multifaceted issue of homeownership as an investment in 2025, providing listeners with a comprehensive understanding of the current market dynamics, the influence of external factors like climate change, and actionable advice for prospective buyers. Whether considering buying a home or exploring alternative investment strategies, the episode equips individuals with the knowledge to make informed financial decisions in an ever-evolving economic landscape.

Transcript

[Jaclyn Hill]

How would you like to listen to explain it to me without any ads? VOX members now get ad free podcasts. Members get all kinds of cool benefits as a thank you for supporting our work. Stuff like unlimited reading on our website and exclusive newsletters. Go to Vox.com members right now to sign up.

[Mandy Woodruff Santos]

This week on Net Worth and Chill. We're tackling the uncertain economic times we are all living in and how you can recession proof your finances. It's financial doom. Doomsday 101.

[James Rodriguez]

In this practical episode, we break down.

[Mandy Woodruff Santos]

What a recession actually is and review.

[James Rodriguez]

Concrete steps to protect and potentially grow.

[Mandy Woodruff Santos]

Your wealth during economic downturns. From building a proper emergency fund to identifying recession resistant assets, you're going to walk away with a clear roadmap for financial stability regardless of market conditions. Listen wherever you get your podcasts or watch on YouTube.com YourRichBFF Mortgage Rates I know they're not cute.

[Jaclyn Hill]

Very ugly right now. Hey, I'm Jaclyn Hill and this is Explain It To Me, the show where you call 1-800-618-8545 and we find the answers to the questions that matter most to you. Miranda hails from the Twin Cities and called in with a question that's on more than a few people's minds.

[Mandy Woodruff Santos]

Is it worth it to buy a house? I think that's always the go to investment for like past generations of like you buy a house and that's kind of your retirement plan and that just doesn't seem realistic or even attainable to buy a house. So it's like, should I even try to do it? Is that something I should do?

[Jaclyn Hill]

This is a question I've wondered about too. Okay, I'm going to be honest, I love to scroll through real estate websites, but should we be buying homes? Given the economy and the interest rates, it can often feel like a fantasy. The market is just so much more different than it was when our parents were looking for starter homes. Is this really where our money should be going? To get an answer, I called up James Rodriguez, senior real estate reporter at Business Insider. Do you ever just like scroll through Zillow dreaming of what it would be like to own your own home? Or am I telling on myself?

[James Rodriguez]

Not. Not at all. I do that all the time.

[Jaclyn Hill]

So the conventional wisdom is that buying a home is the way to build wealth in here in America. Has. Is that true? Has that ever been true?

[James Rodriguez]

Definitely with past generations. And I think especially has this hold on people today when they've seen especially baby boomers who may have bought homes decades ago and have reaped all of the rewards from this really crazy moment in the housing market where prices jumped so substantially during the pandemic. If you compare the end of 2019 to the beginning of this year, home prices are up about 50%. So historically, we have seen people invest a lot in their homes, and for some people, it is absolutely true that they have reaped substantial rewards. I think it's important to look closer at that, though, and see that for some people, it has been really perilous. There have been periods of home price declines. We saw this during the great financial crisis in 2008, when some people lost all of the money that they had put into their homes because of the foreclosure. Foreclosure crisis. And so I think it's important to recognize that while that has been true for some people, it hasn't been true for everyone. And it may not be something that's true in the future.

[Jaclyn Hill]

Yeah, I want to talk a little bit about why that conventional wisdom around home buying and building wealth isn't hitting quite like it used to. What's different for today's home buyers?

[James Rodriguez]

I think we just see the affordability aspect. People are stretched so thin budget wise.

[Jaclyn Hill]

The majority of middle class Americans say that they are struggling financially.

[Mandy Woodruff Santos]

Their financial stress has increased since before the COVID 19 pandemic began. So when you look at inflation, economic.

[Jaclyn Hill]

Instability, a lack of savings, all of these have increased the share of Americans feeling financially stressed.

[James Rodriguez]

Mortgage rates, they went super low during the pandemic. They were at record lows. And that allowed people to get in because even if prices were rising, the rate on their loan was so low that you could kind of stomach the monthly payments and make it work. Whereas now we've seen mortgage rates rise to more than double those levels and home prices haven't really stopped climbing, especially in areas where there's still not a lot of homes on the market. So there's uncertainty around just the future of the economy. Interest rates are up. So that all, all of that together really makes it hard to see a future in which people who are already stretched thin renting. How do you save up money for a down payment? How do you justify these higher mortgage rates? And how do you bring it all together to become a homeowner? It's, it's a real challenge right now.

[Jaclyn Hill]

Is this the case in particular for zoomers and millennials who are looking to buy homes in their 20s and 30s? Like, it just feels so, like. I don't know. I just think of, oh, baby boomers, they got to get their house for, like, $5. And now the rest of us have been priced out, and they're aging in place. Like, there's just so much. And I don't want to just blame baby boomers. It's very easy to do that. That's a little unfair. Yeah. What's keeping these younger generations out?

[James Rodriguez]

It is easy to blame baby boomers, especially when they've been so fortunate in the housing market at large. But I think one of the things you have to think about, too, is the demographic side of things. And we had this huge wave of millennials, currently the largest living generation in the U.S. we knew that they were going to be hitting their prime home buying years around the turn of the decade, 2010s going into 2020, and there was just not enough building happening after the Great Recession to keep up with all of that demand that was on the horizon. So you had people who were also starting to work remotely, and so they wanted more space. And it can be tough to have an optimistic outlook for home buying chances when all of these forces seem to be conspiring against younger generations in ways that older generations just didn't have to deal with. I think we're still feeling the effects of the Great Recession in that respect.

[Jaclyn Hill]

A report released today by the national association of Realtors paints a picture with housing data.

[James Rodriguez]

The Great Recession hits. Employment there fell 1.5 million. We have not recovered that over all these years. We are still short of around 500,000 workers in construction. Another reason why you saw home prices rise so dramatically is not only were millennials competing against their generation, but they were also competing against baby boomers in the market who had cash, who had substantial savings, and were able to, in a lot of cases, bid up home prices. And we're seeing, as you mentioned, baby boomers staying in their homes longer than ever. But eventually they will be aging out of the market, which is kind of a euphemistic way of saying dying. And when you look ahead to that, and substantially less people competing for homes in the US you see household growth slowing down as well. More deaths from boomers combined with lower birth rates over the next couple of decades. And all of that equates to weaker demand for homes going from 2030 through 2040.

[Mandy Woodruff Santos]

Yeah.

[Jaclyn Hill]

Can you sort of run through kind of what the home buying experience and, you know, growth has been like from the boomer side and then sort of compare it to how it goes now?

[James Rodriguez]

Yeah. So you think of a baby boomer who maybe they bought a home in 1994, and they hold onto it for the life of their mortgage for 30 years. Then they sold last year for if you look at typical home price increases, a 305% gain. Say they bought a $300,000 home, it's worth more than $1 million by the time they sell it.

[Jaclyn Hill]

Okay, you can retire with that.

[James Rodriguez]

It's a crazy return. It's really mind boggling to think about the same millennial who maybe bought a $300,000 home in 2010. They might not see as substantial increases over the next 30 years, but they still got to reap all the benefits of those crazy pandemic years when home prices were rising around 50%. And so you bring that forward and you consider all the gains since 2010, and then you look at people who are buying homes today, and it starts to raise questions about will younger buyers today get the same financial benefits of homeownership as their predecessors?

[Jaclyn Hill]

What would it mean for the economy if housing wasn't this go to way to build wealth? Like, if that was not the answer for how do I get a net worth?

[James Rodriguez]

I think that's a really interesting question and one that honestly, we don't know because for so long it has been looked at as the primary method of wealth building. You think about millennials, the typical elder millennial who's born in the 80s, they saw their wealth, the value of their assets, increase by more than 57% just between 2019 and 2022. And 41% of that 41 percentage points was attributable to real estate.

[Jaclyn Hill]

Wow.

[James Rodriguez]

So it's a huge portion of people's assets. I think it's just, it's tough because for every person who owns that real estate, it's all concentrated in this one asset that's not diversified. It's not like it's in the stock market. And if one of the companies in your portfolio tanks, it's okay because you've spread out the risk amongst multiple companies. It's really all concentrated in this one thing that can be threatened by a wildfire or a flood. And that can be concerning for anyone looking at the housing market and seeing so much of that wealth concentrated in homes.

[Jaclyn Hill]

That threat of wildfires and floods James mentioned, it's real. How much has climate change raised insurance prices and how much should we really worry about that when we're thinking of buying a home? That's coming up after the break.

[James Rodriguez]

Hi there. I'm Lale Arakoghlou, host of Women who Travel. At the start of this year I spoke to my friends and colleagues at Conde Nast Traveller, Megan Sparel and Arti Menon, who've masterminded a bumper list of where to travel in 2025. It was fascinating to hear the places they're excited about, like Kodiak island in Alaska.

[Mandy Woodruff Santos]

The thing that I'm really excited about is the native owned Kodiak Brown Bear center. And if you stay in one of their lovely cottages, there's the opportunity to share space with the largest subspecies of brown bear in the world. And this both terrifies me and makes me all warm and tingly inside. In 2025 there's going to be like Banya style steam baths and saunas and whatnot.

[James Rodriguez]

So you can come face to face with a bear and then go to your steam bath to if I come.

[Jaclyn Hill]

With a bear, I better get a.

[Mandy Woodruff Santos]

Steam bath or share the steam bath with a bear. I mean, stranger things have happened.

[James Rodriguez]

Join me on Women who Travel for More Adventures wherever you get your podcasts.

[Mandy Woodruff Santos]

The Nintendo Switch 2 is basically guaranteed.

[James Rodriguez]

To be the most interesting gadget of 2025, and we learned a lot of.

[Mandy Woodruff Santos]

New stuff about it this last week or so. Some of the games that are coming out, some of the specs of the.

[James Rodriguez]

New device and the fact that it's going to cost $449.99.

[Mandy Woodruff Santos]

Except maybe it's not, because the other.

[James Rodriguez]

Thing going on right now is tariffs. And tariffs threaten to change just about everything about tech. What it is, how it's made, where it comes from, and crucially, how much we have to pay for it. So that's what we're talking about on.

[Mandy Woodruff Santos]

The Vergecast all week, wherever you get Podcasts, foreign.

[Jaclyn Hill]

We're back. It's explain it to Me and we're talking about whether it's a good idea to buy a house these days. It's 2025 and climate change is definitely a factor. So I called up Dr. Jeremy Porter. He heads up research into housing and climate for First Street. They analyze the climate risk of homes and share that analysis with websites like Zillow and Redfin.

[Dr. Jeremy Porter]

It really is the point at which your standard American feels climate change. I mean, we're seeing that there's more hurricanes. Breaking news Hurricane Barrow slamming Texas, making.

[Jaclyn Hill]

Landfall just a few hours ago.

[James Rodriguez]

Franceine is now a hurricane in the.

[Jaclyn Hill]

Gulf of Mexico heading for Louisiana. Whipping winds, torrential downpours and communities submerged.

[Mandy Woodruff Santos]

Hurricane Debbie wreaking havoc across the coast. This is the city of Asheville in.

[Jaclyn Hill]

The western mountains of North Carolina, 2000ft.

[Mandy Woodruff Santos]

Above sea level and hundreds of miles.

[Jaclyn Hill]

Away from the nearest coastline.

[Mandy Woodruff Santos]

But such was the force of Hurricane Helene.

[Dr. Jeremy Porter]

We're seeing that there's more extreme precipitation events. What we saw in LA is that there's more wildfires, more severe wildfires than we've seen in the past. But the way that it's affecting individuals is that we're seeing more property damage, more people being impacted by these events directly to their properties or to their communities.

[Jaclyn Hill]

Fear and concern is growing tonight as flames light up the Los Angeles hillsides. Firefighters are scrambling to contain several major fires tonight. Just into our newsroom, we are learning of another fire erupting, this time in Sylmar in the San Fernando Valley.

[Mandy Woodruff Santos]

Overnight, catastrophic damage reported as severe storms slam the central US A tornado emergency in northeastern Arkansas, powerful twisters destroying homes.

[Jaclyn Hill]

In Missouri, an EF1 tornado, winds nearing.

[Mandy Woodruff Santos]

100 miles an hour, causing widespread destruction in the town of Nevada. Homes and businesses reduced to rubble.

[Dr. Jeremy Porter]

Lots of times people live in places like Miami or they live in Houston, and they'll say, oh, you know, the weather's always been like this in the area that I'm at. And they will say, well, what about insurance? And they'll say, well, insurance is killing me. And lots of times people won't make the connection that the reason insurance is spiking is because there's more damages and there's more payouts from the insurance companies.

[Jaclyn Hill]

That's really interesting. Our caller is in her late 20s, Miranda. She lives in the Twin Cities, and she's considering whether buying a house is the right decision for her. What would you say to someone like her?

[Dr. Jeremy Porter]

I think we're at a point at which we finally have data to help make decisions like this. And I think one of the biggest problems that we've seen so far in the way that climate and real estate are being covered is that climate's driving down the value of home prices. It's sort of reversing the trend that we've had in the US for, you know, a century where the American dream was owning a property and people have aspired to do that. I think what we're seeing, though, is that there's a lot more nuance to the decision making process than simply avoiding homeownership because of climate risk. I don't think people should avoid homeownership. I think it's still a good investment. I think that there are ways to optimize that process now, though, that do include taking climate into account the same way we've taken other factors into account in the past. How Do I, you know, optimize the home buying process so that I'm reducing the risk? And maybe I'm buying a home that has, you know, a flood score of a 5 instead of a flood score of a 10.

[Jaclyn Hill]

What's an example of that?

[Dr. Jeremy Porter]

The quintessential example in Miami has been sort of this movement from parts of the Miami beach sort of coastal region into an area called Little Haiti that's further inland in Miami Dade County. It's right along the railroad tracks. It's the high point of Miami Dade County. And people on the real estate market at that time were asking their realtors for, you know, three bedrooms, two bathrooms, 2,000 square feet and a certain level of elevation. They wanted to be a certain level above sea level because of tidal flooding and because of increasing sea level, tidal flooding events along the coast and sort of the limestone bedrock in Miami meant there really wasn't anywhere safe. The water got underground and it rose up through the ground. But high points, places like Little, Little Haiti became much more valuable than they had been prior, prior to this, because people were aware of the flooding risk within that market.

[Jaclyn Hill]

I wonder how all of this plays a role in, like, inequity and gentrification and things like that. Like who's getting pushed where, who's having the impacts of climate change.

[Dr. Jeremy Porter]

Yeah, and that, that, that Miami example that I gave earlier, it was part of an analysis back in 2017, and the title of the paper that it came out in was called Climate Gentrification. It was people leaving the Miami beach area moving into the Little Haiti area, which had been a less desirable area. It was primarily a more vulnerable socioeconomic community, a minority community, and people were moving in. They were driving up the cost of real estate in the area. So having the information and integrating it into the process of the home buying process, I guess it does have consequences in terms of potentially giving those that have the means to avoid climate risk the ability to do so. And those that don't have the means are ultimately unable to.

[Jaclyn Hill]

You know, we've been talking about these climate scores as a way to help people find a home to buy, but so much of our wealth in America is tied up in home ownership. I wonder if there's a flip side to this where it's negatively impacting home values.

[Dr. Jeremy Porter]

There. There absolutely is a negative impact to having a high climate risk score. I think we've already seen, even through the integration of the data on, like, on one of the sites on redfin.com they did an analysis where they exposed half the People that came to the site to the data, they didn't expose the other half of the people to the data. And the people that were exposed to the data systematically searched for lower risk homes. That means the higher risk homes are staying on the market longer. They have lower list to sale prices, or sale to list prices, sorry, on the market. And they are losing property value because of that. Ultimately, that makes its way into the transaction record and depresses the value of property value in, in specific neighborhoods.

[Jaclyn Hill]

Overall, how much of a science versus an art is it to factor in climate change predictions? Like, you know, there's geopolitics, there's a human factor on top of weather and all these external events. Like, how do you do that?

[Dr. Jeremy Porter]

Yeah, and it's an important part of our, of our analysis because a lot of research that exists today basically says, hey, sea level rise is happening on the coast. Millions of people are going to move away from the coast. But if you just, if you go back and model the data historically and you layer in to your point, all this geopolitical information, all of this economic investment information, really the social, political and economic drivers of place, why people choose to live, where people end up living, those things outweigh climate risk in a lot of cases.

[Jaclyn Hill]

Okay, so the story is bigger than just climate. And in fact, the story of home buying is bigger than any one single factor. What that means for those of us still considering opting into the home ownership society. And also what to do if you aren't. That's coming up after this break.

[James Rodriguez]

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[Jaclyn Hill]

We're back. This is Explain it to me. And I was super excited to get to call up our next guest.

[Mandy Woodruff Santos]

Hey, I'm Mandy Woodruff Santos, and my podcast is called Brown Ambition.

[Jaclyn Hill]

Okay. So I have to admit, I am a Brown Ambition listener. You know, I'm trying to get my big girl finances in order. So I'm very happy to be talking with you today about home ownership, which feels like one of the big girl finance things.

[Mandy Woodruff Santos]

Yeah, it sure is, isn't it? I mean, at least that's what society wants us to think. Gotta get a Birkin. Gotta get a home. Big Birkin bag ho. Fast six figish.

[Jaclyn Hill]

Are you a homeowner?

[Mandy Woodruff Santos]

I am. Yeah, I am. I bought my house in 2018, which feels like a thousand years ago. This is pre motherhood, pre pandemic. And at the time, our total mortgage, which included property tax and the actual loan, monthly principal that we were paying was about $2,700. That's increased 1,000 bucks since then. So now I'm spending 3,600. So nearly $4,000.

[Jaclyn Hill]

Oh, my gosh.

[Mandy Woodruff Santos]

And I'm like, oh, I'm reminded. Oh, yeah. That's why I always feel broke. Yeah.

[Jaclyn Hill]

It's interesting, this question we got jumped out to me because it's one that I have, too. So I'm a renter, and I have a lot of friends who have bought or just starting to buy. And I admit that I have not completely given up a little bit of a dream of owning a sexy condo in the city. Like, that is how I see. I don't know if I, like, I'm not trying to have a yard or anything, but, you know, I could. I could live in a condo.

[Mandy Woodruff Santos]

Yards are overrated, so I support that.

[Jaclyn Hill]

Yeah. And we've been told for years that buying a home is this important milestone for adulthood. And, you know, it's this first step to building equity and wealth and generation, generational wealth. I wonder what you make of the question from our listener. Like, should she buy a house? Is this something she should be working towards?

[Mandy Woodruff Santos]

There's all sorts of, like, different trains of thought about, is it a good investment to buy a house? And I think you have to understand why you're buying a house. Are you buying a house for your family to live in for the next 10 plus years? That's a very different equation to me than are you buying a home that you're hoping to fix up? Flip on the market in a year or two. Now, if you really want to buy a house and it is your Dream. And you love everything that you understand what goes into it, you understand, listen, I didn't understand how much property taxes could be. I thought my mortgage was just going to be my mortgage. But you add in property taxes, just about doubled it, which was crazy to me. If you understand maintenance, if you understand how property values can, yes, typically they do go up, but how they can be impacted by things like development and by weather patterns like global warming is real. If you understand all these things and you still really want to buy a house, then, yeah, go get your house especially. I mean, like the ultimate thing is can you afford it? Of course. Mortgage rates, I know they're not cute, right?

[Jaclyn Hill]

At all. Very ugly right now to me, but.

[Mandy Woodruff Santos]

They'Re not as ugly as they could be. Like in the 80s, you know, people were just walking out the door with like double digit interest rates like it was nothing. That was like the norm. Right. So they're not great, but they're not the worst they've ever been. What's more difficult these days is inventory. What I wouldn't do today is because there's such like a dearth of good properties on the market. I wouldn't just buy whatever's there just because you want to buy something, like, I gotta get it, you know, I would. If you can wait, wait until you find a home that you really like that fits all your needs, it's worth it. Yeah.

[Jaclyn Hill]

So if you sit down and you go through these numbers, you do the checklist, you find out where you are emotionally, lifestyle, and you're like, okay, buying a house. That is for me, that is what I want to do. What are the first steps? What do you suggest that a person do?

[Mandy Woodruff Santos]

Look at your credit score, because your credit score is going to determine how expensive that mortgage is going to be. And like we're assuming, right, that people are going to be taking out a mortgage. If you got cash to buy a house, that's a whole other conversation.

[Jaclyn Hill]

Like you're a different person than we talking about right now.

[Mandy Woodruff Santos]

You want to avoid making any big. Taking out additional loans six months before you're going to apply for a mortgage. Because mortgage lenders don't like to see new debt right before they're going to potentially approve you for a loan. Ideally, you're not going to have a fluctuation in income, like household income. So you want to save up for that down payment, of course. But also think about also saving up for a few months of your household income just to have it on the side. Another thing to consider is how Much do you want to put down for your down payment? There are. If you're a first time home buyer, I would absolutely spend time researching first time home buyer programs. There are some through the federal government.

[Jaclyn Hill]

When people are looking at their finances, is there a limit on how much they should budget for home ownership related costs?

[Mandy Woodruff Santos]

Look at your monthly income. Look at it guys post tax and look at maybe 25 to 35% of it. If you live in a more high cost area, it just may be more realistic to look at that like you know, 30 to 40% range and even up to 50%. And that's what I would cap your monthly housing expenses at. I mean the worst thing you can do is buy a property and then end up getting into it and all your bills start hitting and you're like, wait, what? Right? Like how am I supposed to afford all of this? And then you're, you're stopping investing, you're stopping, you know, contributing to your savings account and debt starts getting not paid back and then you're just in a real difficult position.

[Jaclyn Hill]

That's if you want to buy a home but say you can't buy a house or you know, there are some of us who just don't want to. How do you build that equity? Because homeownership is kind of raised as this. This is how you do it. This is how you get a net worth. This is how you do xyz. What if you don't want to buy into that? What can you do?

[Mandy Woodruff Santos]

Oh, you get some Bitcoin, obviously. No, I'm just kidding. Duh. No, listen, homeownership, yes, a home can be a vessel for, you know, increasing equity and, and building wealth. And that's true, but it is not the only game town. Like ever heard of index funds, mutual funds? You should be investing through your 401k. And in fact like we. No one can predict the market, right? No one can predict. I could not have predicted that I would have bought one of the last homes in this. It feels like that because there's such low inventory where I am. And so yes, my, my home value has gone up something nuts. I don't even, I think my house was valued at 400. We bought it for 445. Now it's worth like 700,000 or something.

[Jaclyn Hill]

Wow.

[Mandy Woodruff Santos]

It's not though.

[James Rodriguez]

I don't know.

[Mandy Woodruff Santos]

People be buying houses out here for way too much money. I just can't. You will not catch me dropping 700k on. You should see what a million dollar home is these days. It is depressing.

[Jaclyn Hill]

Yeah.

[Mandy Woodruff Santos]

Yeah. So you can absolutely invest in the stock market, invest through your 401k, max out your Roth IRA, invest in yourself. Can we make that normal again? And I don't mean go get a brand new degree. I mean, what do you value in life? Do those things. One of the myths that I kind of fell into when I became a homeowner was that you would have these tax benefits of being a homeowner. That really changed with the 2017 Jobs Tax and Jobs Cut Act. Whatever Trump put in in effect back then and like the, the amount that you can actually get, you know, how much you can reduce your taxable income as a homeowner has gotten a lot less attractive. I haven't. The most tax breaks I've gotten is when I opened my llc. And I'm not trying to sugarcoat the entrepreneur lifestyle. It ain't for every. But when I say invest in yourself, maybe it's investing in a business idea that you have. Who's to say that your business, you know, if it's a, if it does well, that it couldn't do better on the return on investment than a home? Who knows?

[Jaclyn Hill]

That's Mandy Woodruff Santos. You can find her on her podcast, Brown Ambition. We're working on a show about what to do after you graduate. If you're in middle school or high school and have thoughts about what you want to do after you get your diploma, give us a call. 1-800-618-8545. This episode was produced by Hadi Mwagdi and Carla Javier, who also runs our show. It was edited by a different Miranda than our caller, Miranda Kennedy, with fact checking by Melissa Hirsch and engineering by Andrea Christensdotter. Special thanks to Bird Pinkerton. I'm your host, Jonquillen Hill. Talk to you soon. Bye.