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Marketplace interviewed me for a story to answer the question, Does Homeownership Build Wealth? It reads, in part,

With housing prices skyrocketing in recent years, homeownership has become increasingly out of reach for many Americans.

David Reiss, a law professor at Cornell University who studies housing policy, said there is a bit of a chicken-or-the-egg question when it comes to homeownership and wealth: Does homeownership build wealth, or do people who build wealth buy homes?

There is some truth to the latter, but the general consensus among experts is that homeownership does build wealth, he said.

That’s due to a variety of factors: home values appreciate over time, home ownership is like a forced savings account because you’re paying down your mortgage, and homeowners can benefit from tax subsidies, experts told Marketplace.

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Another benefit of homeownership is that you’re also forced to save as you pay off your house, Reiss said.

“The typical person builds up equity over time by paying down their mortgage,” he explained. Once you pay off the house, you’re the only one who owns it and your lender has no claim over it, he said.

Homeownership Drawbacks, Inequities and Barriers

For minority and low-income communities, homeownership doesn’t provide the same level of wealth accumulation, Reiss said.

Home values in majority-white neighborhoods have risen faster, with values a these areas growing $230,000 between 2012 and 2022, compared to $122,500 for majority-Black neighborhoods over the same time period, according to the real estate brokerage Redfin.

Research from the Brookings Institute has also found that home values in Black neighborhoods are about 21% to 23% below what they would be in non-Black neighborhoods.

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In “cities of opportunity” that have good job prospects, like New York, Los Angeles or San Francisco, housing costs are very expensive, Reiss said. In San Francisco, the average home value is $1.2 million, according to Zillow.

But in places where housing is more affordable, there are fewer job opportunities, Reiss said.

There is some good news: home prices are starting to cool down. But prospective buyers are still sitting it out for now due to uncertainty about the job market and the possibility that prices could fall even lower.

Owning a home is also a big commitment and entails taking on a lot of responsibilities.

“Are you ready to be the person who deals with a leak or with a broken toilet or stuff like that? Not everybody wants to do that,” Reiss said.

And if you’re planning to move in a few years, it may not make sense to purchase a house, Reiss added.

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Are There Other Ways to Build Wealth?

Billionaire Warren Buffet once said “investing in yourself is the best thing you can do,” an axiom that Reiss said he agrees with.

“I think effectively what he’s talking about is education. So you have the ability to create marketable skills that can generate income over your working life,” Reiss said.

Another way to invest in yourself is to improve your financial literacy, Reiss said. He noted that one of his friends had been putting her retirement savings in a money market account, failing to reap any returns from upswings in the stock market.

Reiss said you can build wealth by saving early, having a diversified portfolio, and investing in index funds, which are generally low-cost, low-risk investment vehicles that allow you to invest in a pool of companies.

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If you do decide to purchase a home, the ROI isn’t the most important factor you should consider when buying a house.

“People shouldn’t lose sight of the fact that homeownership is first and foremost about having a home for you and your loved ones,” Reiss said.