Home-ownership Is a Key to Building Wealth

Dated: November 11 2020

Views: 31

Homeownership Is a Key to Building Wealth

Homeownership Is a Key to Building Wealth | MyKCM

For years, real estate has been considered the best investment you can make. A major reason for this is due to the net worth a household gains through homeownership. In fact, according to the 2019 Survey of Consumer Finance Data from the Federal Reserve, for the average homeowner:

“…a primary home accounts for 90% of the total wealth of a family in the U.S.”

How do homeowners gain wealth?

Most large purchases, like cars and appliances, depreciate in value as they age, so it’s understandable to question how owning a home can increase wealth over time. In a simple equation, the National Association of Realtors (NAR) explains how the combination of paying your mortgage and home price appreciation grow overall wealth:

Principal Payments + Price Appreciation Gains = Housing Wealth Gain

As home values increase and you make payments toward your home loan, you’ll gain wealth through equity. The same article from NAR also addresses how wealth gains tend to play out over time:

“Housing wealth accumulation takes time and is built up by paying off the mortgage debt and by price appreciation. And while home prices can fall, home prices tend to recover and go up over the longer term. As of September 2020, the median sales price of existing home sales was $311,800, a 35% gain since July 2006 when prices peaked at $230,000.”

Taking a look at how equity has grown for the typical homeowner, it’s clear to see how real estate is a sound long-term investment. NAR notes:

“Nationally, a person who purchased a typical home 30 years ago would have typically gained about $283,000 as of the second quarter of 2020.” (See graph below):

Homeownership Is a Key to Building Wealth | MyKCM

Bottom Line

Whether you’re a current homeowner planning to put your equity toward a new home or have hopes of buying your first home soon, homeownership will always be a great opportunity to build your net worth and overall wealth. Owning a home is truly an investment in your financial future.

Blog author image

Nanci Gilbert, PA

Nanci strives to provide every client with a smooth and worry-free experience when it comes to buying and selling real estate. In an industry that can move very quickly, she prides herself on taking t....

Latest Blog Posts

Tips for Single Homebuyers: How To Make Your Dream a Reality"

Tips for Single Homebuyers: How To Make Your Dream a RealityIf you’re living on your own and looking to buy a home, know that you can make your dream a reality with thoughtful

Read More

How To Think Strategically as a Buyer in Today’s Market!

How To Think Strategically as a Buyer in Today’s MarketThe game of chess can provide incredible lessons to apply to all aspects of life, including the homebuying process. Chess requires you to

Read More

Home Is Where the Heart Is More than Ever This Year"

Home Is Where the Heart Is More than Ever This YearThere’s no denying the financial benefits of homeownership, but what’s often overlooked are the feelings of gratitude,

Read More

Why Now Is a Great Time To Sell Your House!!!

Why Now Is a Great Time To Sell Your HouseAs we near the end of the year, more homeowners are realizing the benefits of today’s sellers’ market. Record-breaking home price

Read More