The latest Wisconsin Economic Scorecard survey illustrates a trend
that has some financial advisers at odds with real estate
professionals on this key question: is home ownership a good
The latest Scorecard quarterly results released last month included a
question about homeownership and whether respondents believed it to be
a good investment. Among respondents who own homes, nearly 87 percent
said yes. But only 66 percent of renters thought homeownership would
be a good investment, and nearly a third (28 percent) of renters said
it’s not a good investment.
The Wisconsin Economic Scorecard is produced quarterly by the
University of Wisconsin-Milwaukee’s Center for Urban Initiatives and
Research, in conjunction with WisBusiness.com and WUWM public radio.
Joseph Cera, who manages the CUIR Survey Center, says a closer look at
survey responses reveals something intriguing: Younger homeowners
were significantly less likely to say their homes are good
investments. Those with children in the home are also less likely to
think their homes are good investments.
To longtime Wisconsin real estate professional Bob Larson, the
economic worthiness of homeownership is a no-brainer. Larson says the
housing market nationally has returned to pre-recession levels and
thinks young adults, likely influenced by the recent recession, will
come around to his way of thinking.
“Most of us who have been around for a few years know that real estate
has always and always and always been a good investment,” said Larson,
a broker with First Weber Realtors in Waukesha and chairman of the
Greater Milwaukee Association of Realtors. “The only time in our whole
last century that it hasn’t was in the last 10 years when we actually
had a Great Recession and home values went down.”
But Jason Lacey, a portfolio manager and certified financial planning
“To look at your home as an investment, I would disagree with that,”
said Lacey, who works for PJS Investment Management, based in
Lacey defines an investment as a savings vehicle to save for education
or retirement. “I don’t believe a home is a good investment for
that,” he said. “Your home is an asset, but it’s one that you are
For 39-year-old Lacey, who is married with young children, buying a
home in Wauwatosa made sense. “We’re going to be here for a long time.
Our kids will be starting school,” he said. “But do we look at it as
an investment? No, not really.”
Lacey’s viewpoint that homeownership is more of a lifestyle decision
than an economic investment echoes the Scorecard findings.
The Wisconsin Economic Scorecard results reflect a nationwide trend.
According to a 2012 Pew survey, only 45 percent of Americans now view
homeownership as key to a middle-class life. Having a “secure job”
was the top link, listed by 86 percent.
In addition, a 2013 MacArthur Foundation commissioned survey found
that seven out of 10 Americans believe the housing crisis hasn’t
ended; and three out of five say renting ranks with owning for
achieving the American dream.
In Madison, veteran financial consultant Daniel G. Stafford says there
are a lot of variables that determine the ultimate return on real
“It can be a good investment,” he said, “if you sell the home for more
than you paid for it, and for more than you paid in real estate taxes,
home improvements, heat, light, gas, and for more than you paid in
depreciated interest.” Stafford advises his clients to add
miscellaneous costs like furnishings and real estate commissions, then
compare the sum to rental costs over the same period of time.
“If you do that, it’s very easily compared to the return on a CD or an
investment portfolio, because it’s a hard number,” said Stafford.
Stafford and Lacey say they ask clients about their lifestyle before
recommending investing their money in a home.
“If 87 percent of people (in the latest Scorecard) feel that a home is
a good investment, that’s because a home is a lifestyle,” said
Stafford. “There’s a return on investment there that’s not calculable
in simple dollars.”
For real estate agents, the question is a bit more complex. While
acknowledging the impact of the recession and housing crisis, they’ve
glimpsed other reasons why younger people are less likely to see
homeownership as a good investment.
Tina Balaka, a Shorewest Realtor, says high student loan debt is
making it hard or impossible for many young adults to get home loans.
She’s seen an upswing in parents accompanying young couples to house
showings. The parents often are the ones encouraging their sons or
daughters to buy a house — and helping pay for it, she said.
Dan Kruse, a Century 21 agent in Madison, says many young buyers are
wary because they expect to move in a few years due to job demands.
“If you have to move in a year, you’re probably not going to make
money on a home,” he notes. Kruse has learned to be creative — he
has helped some buyers choose a property that can be rented, if need
be, and even works to help owners find tenants. Examples of such
clients might be young doctors completing a two-year residency or
employees of the University of Wisconsin, who expect to be transferred
for awhile but ultimately hope to return to Madison.
On the other hand, Balaka says one lifestyle priority for today’s
young adults is drawing them toward homeownership: pets.
“I hear all the time, ‘I’m buying a home because I have a dog’ or ‘I
can’t wait to get a dog,'” she said, adding that a fenced yard has
clinched many a sale.
–Property taxes important factor–
The Economic Scorecard survey also asked renters a followup question
about how much emphasis they’d place on property taxes when deciding
whether to buy a home. More than half (58 percent) said it would be a
Realtors strongly agree.
“It’s a huge concern for buyers,” said Larson. “I’ve been in the
business for 19 years. People didn’t used to do search criteria for
properties based on the tax bracket in that particular neighborhood.
Now it’s a much bigger deal. They’re saying ‘It’s going to make or
break me.’ Buyers sometimes won’t even look in communities with
Balaka says $4,000 in annual property taxes seems to be a breaking
point with many buyers in her Milwaukee-area market. “For a starter
home, say a three-bedroom, one-bath house, taxes might be $3,200 to
$3,500 in the city of Milwaukee,” she said. “In Greenfield or
Greendale you might be looking at $3,700, $3,800. Hales Corners is
usually over $4,000, but you’re getting bigger homes, a different
But for many buyers, “If they’re looking at two properties and one’s
$4,000 and one’s $3,700, even though it’s only a $300 difference, it’s
over that threshold,” she said.
By Kay Nolan