O'Reilly logo

Is Buying a Home or Renting Right for You? by Moshe A. Milevsky Ph.D.

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Housing Over Time: A Human Capital Approach

A strong argument can be made—absent all the psychic factors involved in the decision—that renting is the optimal choice when you are young.

However, when you are older (say 50 or 60) and you have unlocked a large portion of your illiquid and nontradable human capital and converted it into financial capital, you can afford to “freeze” some financial capital and lock into a home purchase. At that stage, not only do you have more wealth in total, but also your balance sheet (and especially your human capital) is likely not as sensitive to the state of the economy and its disruptive impact on wages.

Now, you might justifiably worry here that if you don’t buy a house when you’re young, you might never be ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required