Giving Up on Homeownership Can Hurt You in the Long Run

For generations, homeownership has been a cornerstone of the American Dream. Owning a home represents stability, a way to build credit, and a powerful path to long-term wealth through equity.

But today, that dream feels increasingly out of reach.

As home prices in the United States continue to outpace wage growth, more young Americans are starting to question whether they will ever own a home at all.

A Growing Sense of Hopelessness

The numbers tell a concerning story.

• A 2022 survey by Apartment List found that nearly 25% of millennials expect to rent forever — almost double the 13% recorded in 2018.

• A 2024 Harris Poll revealed that 42% of U.S. adults — and nearly half of Gen Z — agree with the statement:“No matter how hard I work, I will never be able to afford a home I really love.”

That’s not just a housing issue. It’s a psychological shift with potentially long-term economic consequences.

What Happens When People Stop Believing?

Economists studying this trend wanted to understand how fading hopes of homeownership might shape financial behavior over a lifetime.

To explore this, researchers built a mathematical model simulating household financial decisions from age 20 to 75. The model incorporated:

• Wage growth and volatility

• Rising home prices

• Savings patterns

• Mortgage debt

• Risk tolerance

• Desire to pass wealth to children

Using real-world data from the Federal Reserve’s Survey of Consumer Finances and U.S. Census data, they compared generations and projected outcomes.

The findings were striking.

Roughly 84% of people born in 1950 eventually purchased a home — closely matching real Census data.

But only 74% of those born in 1990 are expected to reach that milestone.

That 10-percentage-point drop may seem modest — but its ripple effects are profound.

The Fork in the Road at Age 20

The research compared two hypothetical 20-year-old renters who start with similar financial resources.

The Hopeful Renter

This individual believes homeownership is achievable. As a result, they:

• Save aggressively

• Work harder

• Accumulate wealth steadily

• Eventually purchase a home

• Continue building equity and savings into later life

The Discouraged Renter

This individual sees homeownership as unlikely. Over time, they:

• Save less

• Consume more relative to their wealth

• Take riskier financial bets

• Accumulate little to no assets

• Live largely paycheck to paycheck

The divergence begins early — when the decision to save for a house is either embraced or abandoned. That single turning point can lead to enormous differences in lifetime wealth.

Riskier Bets and Reduced Work Effort

When housing feels unattainable, people may redirect their financial energy elsewhere.

Researchers observed that renters with a net worth below $300,000 are significantly more likely than comparable homeowners to invest in cryptocurrencies. Among wealthier Americans, homeowners and renters invest in crypto at similar rates. But among lower-net-worth households, renters are far more likely to take these speculative risks.

It may be an attempt to “gamble” back into the housing market.

Work behavior also shifts.

Among homeowners, only about 2% to 3% report reduced work effort, regardless of wealth level. The same holds for high-net-worth renters.

But among renters with lower net worth, the share reporting lower work effort rises to 4% to 6%.

While critics sometimes label these patterns as laziness or “quiet quitting,” the research suggests a deeper structural explanation: when long-term incentives fade, behavior changes.

If working harder no longer brings you closer to buying a home, motivation weakens.

The Broader Economic Impact

The consequences extend beyond individual households.

The model suggests that people who give up on homeownership may:

• Work fewer hours

• Earn less income

• Pay less in taxes

• Contribute less to overall economic productivity

Over time, this could shift fiscal burdens and reduce economic growth.

The housing affordability crisis isn’t just about ownership rates — it may influence national productivity and wealth formation.

Can Policy Restore Hope?

Policymakers have proposed various solutions to address affordability, including mortgage bond stimulus programs and efforts to increase housing supply.

While the effectiveness of specific proposals remains debated, the research suggests one key insight: Timing matters.

If financial support reaches households before they give up, it may reinforce saving behavior and long-term planning. But once discouragement sets in and habits change, reversing course becomes much more difficult.

In other words, hope itself may be a critical economic asset.

The Bigger Picture

Forgoing homeownership can be a rational response to skyrocketing prices. Saving for years only to watch homes become even more unaffordable is discouraging.

But the long-term behavioral effects of giving up may be far more costly than many realize.

Homeownership has traditionally served as a powerful anchor for disciplined saving, career ambition, and wealth building. When that anchor disappears, financial trajectories can shift dramatically.

The housing affordability crisis may not only reshape who owns homes — it may reshape how an entire generation works, saves, invests, and builds wealth.

And that could have consequences lasting far beyond the housing market itself.

Source: Bloomberg

Philippine purchasing power seen to grow but key risks linger

Consumer purchasing power in the Philippines is projected to rise, BMI Research said, underpinned by steady economic growth and a tight labor market that supports real wage gains.

The outlook, however, faces risks from persistently high inflation, declining remittances and elevated household debt levels.

In a note to clients, BMI, a unit of the Fitch Group, held a “a cautious but positive” view on consumption in the country, expecting a slowdown in real household spending growth to 4.5 percent this 2026 from 4.7 percent last year.

This, BMI said, may weigh on the country’s gross domestic product (GDP), which historically gets about 70 percent of its fuel from consumer spending. The firm said GDP may grow by 5.2 percent this year, though still within the downwardly-revised government target of 5 percent to 6 percent.

“Spending will remain influenced by the elevated inflationary pressures as well as currently high debt levels, along with related debt servicing costs,’ BMI said.

“A tight labor market will support spending, as real wage growth returns to positive territory, which will support purchasing power over 2026,” it added.

The economy expanded by just 3 percent in the fourth quarter of 2025 — the slowest pace in more than 14 years outside the pandemic — and well below market consensus.

The weak outturn dragged the average 2025 growth to 4.4 percent, missing the government’s 5.5 percent to 6.5 percent target. Officials and analysts pointed to a mix of climate-related disruptions and the Marcos administration’s sweeping anti-corruption drive, which had curbed government spending and weighed on business and consumer confidence.

‘Tailwinds’ to growth

BMI shared the same view. “The recent weakness in consumer sentiment is driven by concerns over governmental corruption, spiking inflation and natural disasters,” it noted.

Looking ahead, the Fitch unit said improving outlook over the medium term means that consumers would expand spending, leading to a growth in consumption and providing tailwinds to the growth of the Philippine retail sector over 2026.

But the firm believes there are “wider economic challenges” that Filipino consumers will confront this year.

“In 2026, the consumer sector faces significant headwinds amid a highly uncertain macroeconomic landscape,” BMI said.

“Stubborn core and services inflation, escalating global trade barriers, potential labor market softening and widespread geopolitical uncertainty are shaping consumer behavior and market dynamics,” it added.

Source: Inquirer

Growth rebound seen; structural changes urged

Philippine economic growth will likely rebound this year after a marked slowdown in 2025, a brokerage firm said, lifted by a recovery in public infrastructure spending and the impact of interest rate cuts.

Philstocks Financial Inc. said 2026 growth could hit 5.0 percent — at the bottom end of the government’s 5.0- to 6.0-percent goal for the year — but also warned of risks from an inflation uptick and weaker exports.

State spending, which slowed last year as a flood control project scandal unfolded, was forecast to recover as a result of governance reforms while consumption — also affected by the corruption mess — is expected to strengthen as policy rate cuts work their way through the economy.

Remittances from Filipinos working abroad will also provide support to consumer spending and residential investments, Philistocks said.

This will likely be supported by a weaker peso, which is expected to average at P59.5 to the dollar — a new record low — amid a continued balance of payments deficit and lingering investor concerns.

Inflation, which averaged 1.7 percent last year, is projected to accelerate to 3.2 percent in 2026 — within the 2.0- to 4.0-percent target — due to stronger demand, higher food prices and the weaker peso.

The Bangko Sentral ng Pilipinas, which has lowered key interest rates by 200 basis points beginning August 2024 as inflation returned to target, is expected to order another cut this year to boost economic growth.

Philstocks said the economic rebound will also be seen in the stock market, with the benchmark Philippine Stock Exchange index (PSEi) expected to hit the 7,100 level after languishing in the low 6,000s last year.

The 2026 recovery will be supported by robust corporate fundamentals and an estimated 15-percent earnings growth among index members, the brokerage said.

It noted that as of January 30, 2026, the PSEi was trading at a price-to-earnings ratio of 10.5 times, well below its five-year average of 14.4x and the regional average of 19.0x, indicating that local stocks remained at attractive levels.

Sector-wise, Philstocks expects residential property developers, banks, consumer companies and nickel miners to benefit from low interest rates, improving labor market conditions and potential gains in global nickel prices.

As this developed, an economist said that boosting the economy was not just about increased consumption and spending but expanding the sources of growth.

“There should be a wider discussion on the structure of the economy,” Bank of the Philippine Islands lead economist Emilio Neri said in a commentary.

“The country cannot remain overly reliant on a narrow set of growth drivers such as consumption and government spending.”

The limited set of growth sources was highlighted last year by the corruption scandal and the vulnerability was also evident during the Covid-19 pandemic, he said.

“For many years, the Philippine economy has been heavily reliant on consumer spending, supported by remittances and the BPO (business process outsourcing) sector,” Neri said.

“When the pandemic hit, the economy contracted sharply as lockdowns severely disrupted consumption,” he added, noting that countries like Vietnam, with more diverse growth drivers, were better able to withstand the shock.

The same pattern was said to be showing now with growth largely due to household spending.

“[T]he slowdown would likely not have been as severe if the economy had other strong engines of expansion beyond consumption,” Neri said.

“Even with the sharp decline in government construction spending, growth might have been more acceptable if the production sectors had been in a stronger position to offset the drag, specifically agriculture and manufacturing,” he added.

“Greater emphasis must therefore be placed on strengthening production sectors such as agriculture, manufacturing, and construction, supported by high-quality infrastructure that enhances the economy’s ability to produce.”

“The economy remains strong on the demand side, but it is still unable to produce a significant portion of what it consumes,” he noted.

Quality of spending will also be critical for a recovery this year.

Neri said growth could stay weak in the first half of 2026 but rebound in the second half, with full-year growth likely to hit 5.1 percent.

He added that the weak growth reading has also raised the chances of more Bangko Sentral rate cuts.

“With growth likely to remain weak in the first half of 2026, another cut could follow after a potential move in February, especially as inflation is expected to remain within target,” Neri said.

Source: Manila Times