According to the U.S. Census Bureau, most homeowners’ principal financial asset is their primary residence; home equity and retirement accounts combine to represent over 60% of a households’ net worth.
Real estate is among the most rewarding long-term investments, particularly with property values skyrocketing over the past ten years. In addition, as Nadia Angelou, senior economist for the National Association of Realtors (NAR), states, “Everybody can build wealth through homeownership. There are significant long-term and financial benefits. A mortgage payment is also often considered a forced savings account. And the value of a home increases over time so that homeowners can build wealth from the price appreciation.”
In a recent wealth gain report from the NAR, it was noted that investing in real estate could be a particularly good deal for lower-income and middle-class households. Although the amount of home appreciation in dollar value was higher for more expensive homes over the past five to fifteen years, the percentage change in home values is significantly larger for properties owned by low-income households. In the last 10 years (2012-2022), the median value of homes owned by low-income households rose by $98,910, or 75%. Thus, low-income owners were able to build $98,910 in wealth in the last decade solely from home price appreciation. Middle-income buyers were able to accumulate $122,070 in wealth as their homes appreciated by 68%.
An Uneven Distribution
There is no denying that achieving homeownership is not always an easy path, particularly for minorities. Black Americans have the lowest homeownership rates in the nation, at just 44.9% at the end of 2022, compared with 74.9% for white Americans. They also saw the lowest rates of home appreciation among any racial group, with their properties increasing in value by about $115,000 since 2012, compared with $239,000 for Asian homeowners, $162,000 for Hispanic homeowners, and $138,000 for white homeowners.
Nevertheless, “Even though Black homeowners didn’t gain as much equity as other racial and ethnic groups, the amount they gained was still significant,” says Evangelou.
Regardless of your circumstances, being a property owner typically remains a good investment. If you’d like more information about buying/selling or refinancing in today’s market, give us a call or drop us an email.
