From Nest Egg to Nest Cost: The Changing Economics of Owning a Home

Few things are more quintessential to the American dream than owning a home. For the Greatest and Baby Boomer generations, it has been a builder of wealth that has helped many Americans achieve their retirement goals, concurrently serving as a nest egg and a nest to raise a family. However, with changing socioeconomic headwinds, real estate may no longer be a simple choice for growing a family’s wealth. When we look at some factors causing these potential changes, they primarily stem from the surging costs of buying and maintaining a home in modern-day America.

In the past, starter homes were how families got into real estate. However, getting into an affordable starter home on a typical American wage is out of reach for many. Restrictive zoning laws and ever-increasing input costs have made such homes unattractive for builders, the US's primary source of starter homes. Thus, the supply of new starter homes has plummeted, while home prices have risen by 52% nationwide over the past four years.

In addition to the rising costs of purchasing a home, the costs of maintaining homes have risen dramatically as the average age of houses in the US continues to increase. Currently, the median age of a house in the US exceeds forty years, which means more complex and costly repairs as major house systems deteriorate and break down. Coupled with the rise of climate disasters and inflation on parts and labor, home repairs are more frequent and costlier.

Thus, a rising wealth gap is emerging between those who can afford and maintain real estate and those who cannot. But, despite these challenges, other ways to grow wealth exist. For the average person, access to affordable and well-performing investments in the stock market has increased as the barriers to real estate have risen. Therefore, the future of wealth building for the average family might look more and more like a combination of a well-funded IRA and 401(k).

At Lundeen Abrams Advisors, we help individuals across the age and wealth spectrum create and manage portfolios to help grow their wealth and financial security. While we are proponents of real estate investing, we also recognize that it is not the golden egg it once was and, therefore, view it as our job to help clients build wealth in new ways.

If you are starting your career-building journey or are already well into it and need help with your investments, we are here to help. Please schedule a consultation so we can help you find suitable options to secure your financial future in this ever-changing world. We look forward to talking to you soon!