A home has long symbolized the American dream. (Wrongly, in my opinion. But that’s another column.) But is a home still worth owning considering the collapse of one of the biggest bubbles in history — residential real estate? Many people say, “Yes.”

The housing market continues to mend, although at an unspectacular pace. The latest evidence of an improving housing market is the fractional increase in the nation’s homeownership rate in the last three months of 2015 to 63.8 percent. That’s up from 63.7 percent in the third quarter of 2015. (The homeownership rate is still down significantly from its peak of 69.2 in the waning months of 2004.) Closer to home, the market in the Twin Cities is doing well, with the median home sales price in December at $220,000, a 7 percent improvement over the same month the previous year.

So, if you think you might be in the market for a home, I believe there is only one question that really matters, especially for first-time potential owners: How secure is your job?

The greater your job insecurity, the smarter it is to rent. Renting makes sense when there’s a realistic risk you could be unemployed for a long spell, perhaps eventually forced to move to another part of the state or country to get employment. Downsizing, restructuring, rightsizings — pick your favorite euphemism for layoffs — remain commonplace in many industries and businesses. If you’re married or with a partner, how safe is their employment?

Renting remains the best option for the financially insecure. It’s easier to get out of a lease and move than it is to sell a home during tough times.

By the way, the old saw that renters are “throwing their money away” is wrong. Renters can always set up a monthly savings plan to build up equity. If the money goes into a well-diversified low-cost investment portfolio, odds are that the renter will do better financially compared with the return earned by homeowners.

Of course, if you believe your household income is secure, homeownership comes with a number of advantages. A home is the most tax-advantaged investment available to the average person. A home is also fun. You’re in control. You decide whether a 120-pound dog is a good idea, not your landlord.

The answer to the question “to rent or to buy” — lies in the job market, not the housing market.


Chris Farrell is senior economics contributor, “Marketplace,” commentator, Minnesota Public Radio.