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Home Ownership in America
It has been an established financial principle that home ownership is key to wealth building. While the economy has been in recovery and the housing industry is making a comeback, it is a good time to reevaluate whether home ownership is the right choice for you, if you’ve been on the fence.
The Joint Study for the Nation’s Housing of Harvard University is an institution that studies and reports on housing’s critical role in the American economy and in communities. Here are some key points from the most recent study of housing:
A Home of One’s Own
Owning a “place of one’s own” has long been integral to the American Dream. Among every demographic today, home ownership is a desirable path for the majority of people. When most of us investigate the potential of buying a home, we have intrinsic, esoteric reasons, and we have analytically calculated reasons. We use both sides of our brains to make housing decisions.
What Americans Think About Buying A Home
The Case-Shiller Report of Home Affordability shows that in 2017 it is cheaper to buy than to rent in ALL of the 100 metropolitan areas in the country. Add to that the fact that rents have increased over the last few years, and are projected to increase another 3% – 6% throughout 2018. Rents are increasing more than home values.
According to the Federal Reserve’s Survey of Consumer Finances, a typical homeowner’s net worth was $197,500, while that of renter’s was $5,200 as of 2017 (a decrease from $5500 in 2013). Given that home prices have risen by nearly 20% since then, according to Federal Housing Finance Agency the wealth of home owning Americans would have grown even more. That is, a typical homeowner will be ahead of a typical renter by 45 times, on a lifetime financial achievement scale.
Historically low interest rates combined with reasonable home values has maintained the affordability of real estate. While home values have increased by 4% nationally over last year, which is a normal, healthy percentage, these values will only continue to increase. Buying a home is a better option for those who are capable.
*While news outlets love to fret over a looming “housing bubble”, the statistics clearly show that home values are increasing in a healthy fashion.
Home appreciation is happening in most areas of the country, at a pace that is normal and healthy, and also at a pace that is double that of wage growth in most of the U.S. As economic conditions improve, more Americans have job stability and savings to seriously consider home ownership.
What Americans Feel About Home Ownership
The Harvard housing study reveals the top five reasons why home ownership is a value to Americans.
- Home is a place to raise children and provide a good education.
- Home is a place of safety.
- Owning a home provides more space for your family.
- Owning a home provides control over your own living space.
- Home ownership is a good way to build wealth to pass on to your family.
Home buying motivations for most Americans include having control and freedom to create the home they want. To paint the walls and choose the flooring, and to decorate to their heart’s content. Parents want a yard for their children (including the fur children). They want to choose a home in a desirable school district. In short, they want more control over the lifestyle they want to live. Homeownership facilitates all of the above.
Wealth-building is a value that crosses from right-brain to left-brain very easily. Having wealth to pass on to family makes sense to both the rational mind and the heart. The number one way to build wealth for most Americans has been and continues to be home ownership. Homeownership is key to wealth building, and will continue to be so in the future.
Homeownership is Key to Wealth Building
Case Study: Karen’s Parents
“When my dad retired from the Navy, my parents bought a 2.5 acre parcel in a small town in Florida. They built a house, then subdivided the lot, then built another house. They sold the first house. Then they sold the 2nd house, bought a fixer-upper (for cash) and moved into it, and fixed it up. Two years later, they sold that house for double what they paid for it. (it was 2006, the top of the market…what excellent timing!) They bought a home that my mother now lives in, and all along the way invested extra money in stocks. (the stocks haven’t done as well…the real estate did!) All of this took place over 35 years, of course, but that’s what real estate is…a long-term wealth-building asset. It’s not an ATM, to be refinanced at every opportunity.”
Helpful Resources Regarding the Benefits of Homeownership:
- With rents around the country skyrocketing the tax benefits of owning a home only become more magnified! Check out Bill Gassett, Greater Metrowest Massachusetts Realtor‘s article – Tax Advantages of Owning A Home
- Owning a home is one of the greatest foundations to build memories. In this article Five Signs that You’re Ready for Homeownership, Andrew Fortune, Colorado Springs Real Estate Agent, shares how knowing the right time in your life to buy a home is an important part of the process.
- We want to present a balanced perspective on our blog. In his clever article Five Types of People Who Shouldn’t Buy a Home, Conor McEvily, Seattle real estate agent, points out that at certain times, buying a home and taking on all the commitments associated with home ownership are best deferred to when you are really ready to make the leap.
If you’re ready to make the step to homeownership, give us a call, we can help you through the process.
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