It is common for people who have started families or have reached a certain age to feel the pressure of buying a home. While expectations can come from different quarters, basing a decision as big as buying a home is not something you would want to rush into. After all, living on rent does come with its share of pros. So, is it smarter to buy a house or rent?

Is It Better Financially to Rent or Buy a House?

One of the biggest arguments in favor of home buying is that the property serves as an investment. However, it is not uncommon for people to miscalculate or overestimate their return on investment (ROI). Besides, homes don’t necessarily work as appreciating assets all of the time.

According to Robert Shiller, a Nobel Prize winner and a Yale economist, real inflation-corrected prices of homes from 1890 to 1990 remained “virtually unchanged”. Analysis of Shiller’s data revealed that home prices had grown at a compound annual rate of as little as 0.3%, adjusted for inflation, during a 100-year period.

When you decide to buy a home, you mustn’t put all your financial eggs in one basket. This requires that you hang on to some of your investable assets. It is also crucial that you look at your purchase as a right to housing instead of a long-term investment that will yield great dividends.

According to most experts, housing may work well as an investment, but not as a great investment. As a result, if your main aim of buying a home is an investment, you might be better off putting your money in a well-balanced and diversified portfolio of stocks and bonds, and continue living on rent.