A recent study completed by the University of Chicago and Northwestern University shows that individuals who give up on the prospect of becoming homeowners spend more on nonessential items, take bigger financial risks, and work less. This behavior is believed to promote longstanding trends in income inequality. Comparatively, renters who still believe that they may own a home later in life possess healthier financial habits and work ethics.
The findings reveal that changes in attitudes towards homeownership can influence a person’s view on financial management, risk tolerance, and work regularity. The consequences of these modifications can affect markets, retirement security, and prolong income disparity. An interesting comparison was made between Americans who turned 20 years old in 1970 and 2010; it was forecasted that only 74.2% of the latter group will be homeowners, compared to 83.8% of the former.
The study further uncovers that approximately 15% of those born in 2010 had abandoned the idea of homeownership by age 30 and predicts that this sentiment will remain stagnant into their 40s. The research also indicates that the status of homeownership can influence people’s investment strategies. For example, renters with a net worth less than $300,000 were more inclined to invest in cryptocurrencies compared to homeowners with similar wealth, likely in an effort to 'catch up.'
Long-term, these differences in spending habits can result in substantial wealth inequality. For instance, renters are predicted to accumulate little to no wealth by the age of 65, contrasting greatly with homeowners who would have spent time growing their financial assets. The study underscores the significance of positivity towards future homeownership, as this belief shapes savings, work effort, and investment decisions, with profound effects on long-term wealth distribution.