Homeownership March 12, 2022

Owning a home proves to be a path to “Tremendous” Wealth Gains

This is quite an interesting report by National Association of Realtors. The wealth growth is just beyond any other types of savings.

Homeownership Fueling ‘Tremendous’ Wealth Gains

March 9, 2022

Home prices have accelerated at a record pace over the last decade, bringing growing wealth to households from long-term homeownership, according to a new report released by the National Association of REALTORS®.

From 2010 to 2020—across income groups and metro areas—the total housing wealth for middle-income households grew by $2.1 trillion, according to NAR’s report, Housing Wealth Gains for the Rising Middle-Class Markets.

A homeowner who purchased a typical single-family existing home 10 years ago at a median sales price of $162,600 is likely to have seen an increase in housing wealth of $229,400, according to NAR’s report. Of that wealth gain, 86% can be attributed to price appreciation. Home prices have continued to grow over the last decade. The price for the median single-family existing home has risen at an annual pace of 8.3% from the fourth quarter of 2011 through the fourth quarter of 2021, NAR reports.

“Owning a home continues to be a proven method for building long-term wealth,” says Lawrence Yun, NAR’s chief economist. “Home values generally grow over time, so homeowners begin the wealth-building process as soon as they make a down payment and move to pay down their mortgage.”

More Americans are experiencing this wealth benefit, too. The number of homeowners is growing. Over the past decade, 58% of 917 metro areas tracked by NAR gained middle-income homeowners. (NAR defines a middle-class homeowner as one earning an income of over 80% to 200% of an area’s median income.) About 6.3 million more new homeowner households sprouted up between 2010 through 2020.

The metro areas with the largest increase in middle-income homeowners in that time: Phoenix; Austin, Texas; Nashville; Dallas; Atlanta; Orlando, Fla.; Portland, Ore.; Seattle; and Tampa, Fla.

“Middle-income households in these growing markets have seen phenomenal gains in price appreciation,” Yun says. “Given the rapid migration and robust job growth in these areas, I expect these markets to continue to see impressive price gains.”

Metros With the Largest Home Price Gains

The biggest price increases in the fourth quarter of 2021 as a percentage of the purchase price over the last decade were in:

  • Phoenix-Mesa-Scottsdale, Ariz.: 275.3%
  • Atlanta-Sandy Springs, Ga.: 274.7%
  • Las Vegas-Henderson-Paradise, Nev.: 251.7%
  • Cape Coral-Fort Myers, Fla.: 233.9%
  • Riverside-San Bernardino-Ontario, Calif.: 207.6%

“These escalating home values were no doubt beneficial to homeowners and home sellers,” Yun says. “However, as these markets flourish, middle-income wage earners face increasingly difficult affordability issues and are regrettably being priced out of the homebuying process.”

Read NAR’s full report, Housing Wealth Gains for the Rising Middle-Class Markets.

Source: https://magazine.realtor/daily-news/2022/03/09/homeownership-fueling-tremendous-wealth-gains