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Economist Peter Schiff Says Your House Is a ‘Money Pit’ — Is It Really?

July 8, 2024

3 min Read

Written by Vance Cariaga

Edited by Daria Uhlig

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If you’ve had a hard time buying a house because you either can’t afford it, can’t get a loan or haven’t found the right fit, here’s some good news: You might be avoiding a “money pit” that will set you back financially in numerous ways. That’s the take of economist Peter Schiff, who recently challenged the notion that buying a home is one of the keys to building wealth and attaining financial security.

Schiff, chief economist and global strategist at Euro Pacific Asset Management, addressed the topic during a recent appearance on the “Iced Coffee Hour” podcast. Schiff told hosts Graham Stephan and Jack Selby, “A house depletes your savings. It’s a money pit.”

That take goes against the conventional wisdom that buying a home and watching it appreciate in value is one of the best money moves you can make. Much like stocks, home prices have been on a steady climb for decades — and lately, that climb has hit a much faster pace.

Average prices of homes sold in the U.S. hit $513,100 during the 2024 first quarter, according to Federal Reserve data. That’s up from $384,600 at the end of 2019 — a gain of 33% in less than five years. If you bought a home late last decade and still own it today, chances are your net worth has risen considerably.

But Schiff counters that those numbers don’t always tell the whole story. You also need to account for the role inflation plays in home appreciation. Land appreciates over time, Schiff said, but houses don’t. While your house might have gone up in value, you probably also face higher costs to maintain and live in it.

“Even if somebody tells you, ‘Oh, here’s this house that I sold for $1 million and I bought it, whatever 10, 20 years ago for $500,000,'” the amount of money they likely spent to justify the $1 million price tag — kitchen and bathroom renovations, for example, and a new roof and electrical upgrades — might’ve eliminated any profit on the sale.

There’s no question that it takes a lot of money to buy and maintain a house. Homeowners can expect to pay $14,155 a year, or $1,180 a month, in hidden costs related to owning a home, Forbes reported last year, citing research from Zillow and Thumbtack. Those costs include maintenance and repairs as well as increases in property taxes and utility costs.

Staying on top of maintenance can reduce the hidden costs of owning a home. Thumbtack economist Jack Erb told Forbes that your first priority should be changing heating and air conditioning filters and keeping plumbing clean. Erb’s other recommendations to keep your home from becoming a money pit include: