That's a good question. Believe it or not, buying a home is not for everyone. But it is one of the best ways for most people to build wealth in three different ways.

Equity: First, a home buyer makes payments on a loan. By paying down the loan, your "forced savings" builds equity in your home that you do not enjoy when you rent.

Appreciation: Second, you build wealth by the principle of appreciation in your home. While real estate markets may experience temporary downturns, homes typically appreciate in value. Over time, your wealth grows as your home becomes more valuable.

Tax Savings: Third, you build wealth when you have a mortgage because the federal government lets you take an income tax deduction for all the interest you pay on your mortgage (thousands of dollars a year). That means you build wealth by paying less in taxes each year you pay mortgage interest. And when the time comes to sell your home, you can take advantage of a generous capital gains tax exclusion not available for other types of long-term investments.