HOMEOWNERSHIP STILL PAYS
In spite of the real estate market’s decline over the past couple of years, a recent analysis of Federal Reserve data by the National Association of Realtors shows that homeownership is still a smart financial decision. For example, when comparing homeowner’s wealth to that of renter’s homeowner’s wealth exceeds by a 50 to 1 margin. The main difference is home equity.
For those who have owned their homes since 2003, home equity gains are the rule rather than the exception. Those in the Bay area of California who purchased five years ago average $105,000 in equity. The tougher real estate markets such as Detroit are facing negative equity. However, those who have owned their homes for more than five years have smaller negative equity.
In all 150 markets tracked by the National Association of Realtors, including the hard-hit markets, homeowners who’ve been in their homes for 10 to 20 years have enjoyed strong equity gains despite the decline in real estate. For example, in Detroit the equity for a 10-year owner is more than $10,000. For a 15 year homeowner the equity averages $60,000 and for 20 years it’s $78,000!
The data clearly shows that homeownership does pay and that it remains the largest store of wealth for the typical household. Homeownership provides growth in personal wealth in spite of difficult economic times.