The significant increase in homeowner net worth can be attributed to several factors, with home equity being a major contributor. According to the Survey of Consumer Finances (SCF) report, the growth in median net worth between 2019 and 2022 was the largest in the history of the modern SCF. This surge in net worth was primarily driven by the soaring home prices during the “unicorn” years for housing.
Home Equity is a Major Factor in the Sharp Rise in Homeowner Net Worth
During this period, there was a shortage of available homes for sale, leading to a surge in demand from buyers taking advantage of record-low mortgage rates. The resulting supply-demand imbalance pushed home prices to unprecedented levels. As a result, homeowners who owned property during this time experienced substantial growth in their equity.
If you’re still undecided about whether to rent or buy a home, you may be concerned about missing out on the opportunity to boost your net worth. However, it’s important to note that there are still ways to increase your net worth in the coming years. Buying a home can be a wise investment since home values tend to appreciate over time.
While mortgage rates have increased to around 7-8%, many areas of the country are still experiencing rising home prices due to the limited supply compared to demand. Experts predict ongoing appreciation in the housing market, albeit at a more typical pace. Therefore, purchasing a home now can continue to build your equity in the long run.
Jessica Lautz, Deputy Chief Economist at the National Association of Realtors (NAR), emphasizes the importance of considering the total cost of homeownership when deciding between renting and buying. Despite the expenses associated with homeownership, such as maintenance, utilities, and commuting, the financial benefits outweigh the costs. According to recent data from the Federal Reserve, the median net worth of homeowners is significantly higher than that of renters.
The Bottom Line
Homeownership has the potential to significantly boost your net worth over time. If you’re interested in learning more about the benefits of owning a home, it’s advisable to connect with a local real estate agent who can provide further guidance.
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