Skip To Content

    Homeownership Is a Key to Building Wealth

    For years, real estate has been considered the best investment you can make. A major reason for this is due to the net worth a household gains through homeownership. In fact, according to the 2019 Survey of Consumer Finance Data from the Federal Reserve, for the average homeowner:

    “…a primary home accounts for 90% of the total wealth of a family in the U.S.”

    How do homeowners gain wealth?

    Most large purchases, like cars and appliances, depreciate in value as they age, so it’s understandable to question how owning a home can increase wealth over time. In a simple equation, the National Association of Realtors (NAR) explains how the combination of paying your mortgage and home price appreciation grow overall wealth:

    Principal Payments + Price Appreciation Gains = Housing Wealth Gain

    As home values increase and you make payments toward your home loan, you’ll gain wealth through equity. The same article from NAR also addresses how wealth gains tend to play out over time:

    “Housing wealth accumulation takes time and is built up by paying off the mortgage debt and by price appreciation. And while home prices can fall, home prices tend to recover and go up over the longer term. As of September 2020, the median sales price of existing home sales was $311,800, a 35% gain since July 2006 when prices peaked at $230,000.”

    Taking a look at how equity has grown for the typical homeowner, it’s clear to see how real estate is a sound long-term investment. NAR notes:

    “Nationally, a person who purchased a typical home 30 years ago would have typically gained about $283,000 as of the second quarter of 2020.” (See graph below):

    Homeownership Is a Key to Building Wealth | MyKCM

    Bottom Line

    Whether you’re a current homeowner planning to put your equity toward a new home or have hopes of buying your first home soon, homeownership will always be a great opportunity to build your net worth and overall wealth. Owning a home is truly an investment in your financial future.

    Trackback from your site.

    Danny Cheung

    I spent over twenty five (25) years with the Department of Defense in the hardware/software design and development as well as program management prior to joining the Group in a full time capacity. I am thrilled to put my years of experience as an Electronics Engineer to assist and lead our Real Estate Group to the next level. I am committed to establishing the tools and resources necessary for our team members to work more seamlessly and effectively thus ensuring our clients full satisfaction. My wife and I have two daughters and a dog (he's more like our son). I enjoy travelling and watching sports especially football…Go Skins!

    Leave a Reply