For as long as I can remember I have always been taught that real estate is one of the best investment you can make. A big reason for this is because of the net worth a household gains through homeownership. According to the Survey of Consumer Finance in 2019 from the Federal Reserve, for the average homeowner:
“…On average, a primary home accounts for 90% of the total wealth of a family in the U.S.”
How does it work?
Most large purchases depreciate in value as they age, so it makes sense to wonder how owning a home can appreciate in value. In a simple equation, the National Association of Realtors (NAR) explains how the combination of both paying your mortgage and home price appreciation grow overall wealth:
Mortgage Payments + Property Appreciation = Housing Wealth Gain
As home values go up and you pay down your mortgage, you’ll begin to acquire wealth through equity. The same article from NAR also explains 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.”
Looking at how equity has grown for most homeowners in Philadelphia and its suburbs, it’s clear to see how real estate is a solid, 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):
Whether you’re a current homeowner planning to put your equity toward a second home or have hopes of buying your first, homeownership will always be a great opportunity to build your net worth. Purchasing a home is truly an investment in your financial future.
*The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Westbuilt Propertie, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.