When you’re a REALTOR®, you realize immediately that everyone’s housing needs are different. Some people are looking to expand to make room for a larger family, while some folks are downsizing to have a space that is more comfortable for their needs. One constant between these people is that they all want to get the most out of their investment. Owning a home has traditionally been an exceptional way to help build wealth in the long term because it allows you to build equity, which is the difference between your home's value and the remaining amount of your mortgage. Over time, your home's value may appreciate, increasing your equity and net worth. Additionally, owning a home can provide tax benefits, such as deductions for mortgage interest and property taxes.
A new housing report by the National Association of Realtors® reveals middle-income homeowners accumulated $122,100 in wealth as their homes appreciated by 68% in the last 10 years. The report, Wealth Gains by Income and Racial/Ethnic Group, speaks to the value agents and Realtors® bring to consumers when helping buy and sell homes that build generational wealth. NAR released the report during its 2023 Realtor® Broker Summit as the association commemorates Fair Housing Month.
While not everyone has the same opportunities for homeownership, data show substantial variations and inequalities in homeownership rates across different income and racial and ethnic groups. For instance, low-income homeowners were able to build $98,900 in wealth in the last decade from home price appreciation only, while upper-income households saw an increase of $150,800.
"This analysis shows how homeownership is a catalyst for building wealth for people from all walks of life," said Lawrence Yun, NAR's chief economist. "A monthly mortgage payment is often considered a forced savings account that helps homeowners build a net worth about 40 times higher than that of a renter."
During Fair Housing Month, I think it’s important to look at homeownership’s effects on different groups from different backgrounds. Although Black homeowners experienced the smallest wealth gains among any other racial or ethnic group, these owners were able to accumulate over $115,000 in wealth in the last decade. For the first time in this report, NAR identified the top 10 U.S. metro areas which have recorded the largest wealth gains for Black homeowners over the last 10 years. Owners in these areas were able to accumulate more than $125,000 in wealth in the last decade.
Along with the wealth gains accumulated in the last decade, homeowners also saw their debt drop by 21%. Many homeowners who were able to refinance and secure a rate lower than 4% in the months following the onset of COVID-19 may have paid off an even larger amount of their mortgage, Yun noted.
I think Kenny Parcel, NAR’s 2023 President said it best; "Your neighborhood Realtor® is a champion able to help you achieve the dream of homeownership. It helps create long-term wealth and financial stability for your family and future generations."
Fair Housing is important all year long, and this study shows that making sure that all doors are open to potential homebuyers is crucial for future wealth for people of all different backgrounds. Realtors work for their clients and their homebuying and selling needs everyday. That’s Who We R®.