Want to Build Wealth? Buy a Home This Year

Every year, households across the country make the decision to rent for another year or take the leap into homeownership. They look at their earnings and savings and then decide what is financially sensible for them. That equation will most likely take into consideration monthly housing costs, tax advantages, and other incremental expenses. Using these factors, recent studies show that it’s more affordable to own than rent in most of the country.

There is, however, another financial advantage to owning a home that’s often forgotten in the analysis – the wealth built through equity when you own a home.

Odeta Kushi, Deputy Chief Economist for First American, discusses this point in a recent blog post. Here is her explanation:

“Once you include the equity benefit of price appreciation, owning made more financial sense than renting in 48 out of the 50 top markets, with the only exceptions being San Francisco and San Jose, Calif.”

Important note: In 2020, home sellers nationwide realized a home-price gain of $68,800 on the typical sale, the highest level in the U.S. since at least 2005.
The typical gain in the sale of the home (equity) has increased significantly over the last five years.

What does the future look like for homeowners regarding equity?

Here are the seven major home price appreciation forecasts for 2021:Want to Build Wealth? Buy a Home This Year. | Keeping Current MattersThe National Association of Realtors (NAR) just reported that today, the median-priced home in the country sells for $309,800. If homes appreciate by 5% this year (the average of the forecasts), the homeowner will increase their wealth by $15,490 in 2021 through increased equity.

Final Thought

As you make your plans for the coming year, be sure to consider the equity benefits of home price appreciation as you weigh the financial advantages of buying over renting. When you do, you may find this is the perfect time to jump into homeownership. Call us anytime with your questions!

~Real Advantage Partners team

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