I probably have said 1000x you don't have to wait to be married or a grownup or whatever excuses people use to NOT buy a house and just rent while they are young. If you have a steady job, some good credit, you can start building your wealth, NOW. I wish I would have put my big girl pants on years ago when I first moved back to Houston in 2001. I paid an astronomical amount of rent for years. I told myself all the typical excuses why one wouldnt want the responsibility of BUYING. I should have just bought my little condo in the Houston Heights and would have been set combined with my 401 savings from my big grown up corporate cosmetics job. (kicking myself)
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 home ownership. 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): 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, home ownership 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. How good will it feel when you find that person in your relation where you both equally bring something to the table and are each others assets, not liabilities and compbined, are better together!