If you’re thinking about homeownership, you want to know the decision will be a good one. And for many, that means thinking about what home prices are projected to do in the coming years and how that could impact your investment. So how homeownership is the key to long-term wealth??
Home Price Appreciation in the Years Ahead
Experts project a return to a steadier rate of price appreciation in the years that follow. According to over 100 economists, investment strategists, and housing market analysts polled by Pulsenomics in their latest quarterly Home Price Expectation Survey (HPES), home prices will return to more normal levels of appreciation through 2027. The big takeaway is that experts aren’t forecasting a drastic fall in home prices nationally, even though some markets will see home price appreciation while others may depreciate. And when they look further out, they see steady price appreciation in the long run. That’s a great example of why homeownership wins over time.
So homeownership is the key to long-term wealth, but how!?
Once you buy a home, home price appreciation raises your home’s value, and that grows your household wealth. In this example, if you bought a $400,000 home at the beginning of this year and factor in the forecast from the HPES, you could accumulate over $54,000 in household wealth over the next five years. So, if you’re wondering if buying a home is a sound decision, keep in mind that homeownership is the key to long-term weath, if you dont believe me, ask Donald Trump!
Mortgage Rates Are Constantly Changing
Mortgage rates have been hovering between 6.5% – 7% over the last several months. However, as Sam Khater, Chief Economist at Freddie Mac, notes, they’ve been coming down some recently. Lower mortgage rates improve your purchasing power when you buy, and that can help make homeownership more affordable. The recent drop in mortgage rates is good news if you couldn’t afford to buy a home when they peaked
Home Prices Will Appreciate
According to the Home Price Expectation Survey, home values will go up steadily over the next few years. Rising home prices in the coming years mean two things for you as a buyer: waiting to buy a home could mean it’ll become more expensive to do so, and buying now means the value of your home, and your net worth, will likely grow over time. The only bad time to buy a home would be later.
Housing Share of Net Worth
According to the 2019 Survey of Consumer Finances, a triennial survey that collects detailed accounts of households’ finances, the median homeowner has 40 times the household wealth of a renter – $254,900 for the former compared to $6,270 for the latter. However, analyzing the difference in wealth between renters and homeowners by income level further underscores the wealth-building power of homeownership.
For Most, The Largest Wealth is Housing
If you are wondering why homeownership is the key to long-term wealth, well here is why! Remember, numbers don’s lie!
This pattern has remained consistent over the last three decades, according to the historical Survey of Consumer Finances data. In 2019, housing wealth represented, on average, nearly 75 percent of the total assets of the lowest-income households. For households in the middle of the income distribution, housing wealth represented between 50 and 65 percent of total assets, but for the highest income households, that percentage was only 34.
Despite the risk of volatility in the housing market, numerous studies have demonstrated that homeownership is for the key to long-term wealth, mainly when compared with renting. Owning a home grows your net worth, and since building that wealth takes time, it makes sense to start as soon as you can. While there may be some short-term challenges, the long-term benefits of homeownership outweigh them. So, partner with a trusted real estate professional and lender to navigate the home buying process and invest in your future. With home prices projected to appreciate and mortgage rates becoming more affordable, now is a great time to consider homeownership as a long-term investment strategy. Remember, your home is not only where your heart is but also where your wealth is. Start building your wealth today by becoming a homeowner.