Ask an advisor: Should I keep investing or buy a home?


Welcome back to “Ask an Advisor,” the advice column where real financial professionals answer questions from real people. The topic can be anything in the world of finance, from retirement to taxes to wealth management — or even advice on advising.

For many people, buying a home is an important step toward the American Dream. But it’s also an expensive step — especially these days. Ten years ago, the average price of a house sold in the United States was $324,400, according to Federal Reserve data. By the third quarter of 2023, it had risen to $513,400 — a 58% increase.

Meanwhile, mortgage rates have soared to historic highs. In October 2023, the average rate for a 30-year fixed-rate mortgage reached 7.79% — the highest it had been in two decades. (As of December, it’s inched downward to 6.67%, but that’s still unusually high.)

All these costs raise a question: Is buying a home still the only path — or even a viable one — to a sound financial future? One young Financial Planning reader has been struggling with this dilemma. He’s already saving and investing for his future, and a hefty down payment could take away from those efforts. But would owning a house or apartment be worth the sacrifice? 

For advice, he turned to the experts. Here’s what he wrote:

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Dear advisors,

Is it worth it these days to buy a home, even if it means less money for my investments?

For context, I’m a 25-year-old engineer in Providence, Rhode Island. My salary is $67,000. To save for retirement, I set aside about $600 per week, which I divvy up between my 401(k), my high-yield savings account and an S&P 500 GARP ETF. 

I’m happy with how these investments are growing, but sometimes I wonder if I should be using my savings for a down payment instead. Right now my girlfriend and I rent our apartment for $2,000 (just $1,000 for me), which leaves room for saving and investing. But am I neglecting to “build equity”? On the other hand, with mortgage rates so high these days, is building equity even worth it? Which should I prioritize — my investments or owning a home someday?

Sincerely,

Perplexed in Providence

And here’s what financial advisors wrote back:



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