Venus Williams Says Invest Before Buying a House
Rent First,Invest Then Buy: A New Approach to Homeownership
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Should buying a home be the first step on your financial journey,or the last? Financial advisor Tiffany Williams suggests a shift in perspective: prioritize investing before diving into the housing market.
“You should own the house once you’ve done everything else,” Williams explained. “Once you’ve invested your money, once it’s working for you, then maybe buy the house.”
There’s nothing wrong with setting homeownership as a goal, she emphasized, but Williams encourages Americans to do the math and project their long-term finances.
“Instead of putting that $100,000, $200,000 on that down payment, should you just rent a place and invest that money? You should compare the returns,” she said.
The Allure of homeownership
Homeownership has traditionally been considered a key step to financial success.A recent survey commissioned by US. Mortgage Insurers found that 78% of Americans consider owning a home to be very significant, with 39% saying it’s essential for stability and 35% believing it to be a good investment.
But despite the advantages of homeownership, it’s less expensive to rent a starter home than to buy one. According to a July report by Realtor.com, renting comes with an average monthly savings of $1,067 in the top 50 metros in the U.S.
Not only are renters able to save more, but that extra cash can be put toward assets that have arguably performed better than housing in recent years.
Investing vs. Homebuying
Over the last five years, as of the third quarter of 2024, the median sale price of an American home surged from $318,400 to $420,400, per the St. Louis Fed — a return of 32% over that time. Meanwhile, the S&P 500 index has soared above 90% over a similar period, not including dividends.Simply put, stocks have outperformed housing lately. In fact,housing has underperformed against other assets,to. The price of gold, for example, has appreciated over 80% over the last five years.
Of course, past performance is not an indicator of future returns. Just becuase housing has underperformed other asset classes recently doesn’t mean the next four years or more will look the same.However, it’s worth noting that the price of entry is much higher for housing due to the down payment. this is why buying a house early in your investment journey can limit your ability to diversify across different asset classes.
Investors who follow Williams’ advice and focus on saving and investing first can build a robust and diversified portfolio before they enter the housing market. With this in mind, it could be helpful to think of homeownership as the final destination in your wealth-building journey rather than the first step.