Why Homeownership Wins in the Long Run

Why Homeownership Wins in the Long Run

Amidst higher mortgage rates, inflationary pressures, and concerns about a potential recession, many individuals are questioning whether it's still wise to buy a home this year. While there are unique challenges in the current market, it's important to consider the long-term benefits of homeownership before making a decision.

If you know individuals who purchased homes several years ago, whether it's been 5, 10, or even 30 years, you'll likely find it difficult to find someone who regrets their decision. The reason behind this is tied to how home values tend to appreciate over time, contributing to the growth of personal wealth. This perception is evident in a recent Fannie Mae survey where 70% of respondents expressed their belief that buying a home is a safe investment.

Let's take a closer look at how home price appreciation can significantly add to your wealth over the years.

Home Price Growth over Time

The following map utilizes data from the Federal Housing Finance Agency (FHFA) to illustrate the remarkable price gains observed over the past five years. It is important to note that home prices can vary significantly based on the region, which is why the map is divided into different regions to highlight broader market trends.

If you look at the percent change in home prices, you can see home prices grew on average by just over 56% nationwide over a five-year period.

While certain regions may slightly deviate from the average, overall, home prices have experienced significant growth within a relatively short period. Moreover, if we expand the time frame even further, the long-term benefits of homeownership and the substantial gains made by homeowners over the years become even more evident (refer to the map below).

The second map shows, nationwide, home prices appreciated by an average of over 290% over a roughly 30-year span.

Over the past 30 years, the nationwide average indicates that homeowners who purchased a house saw their property nearly triple in value during that time. This significant appreciation is a key factor in why many homeowners who bought their homes years ago remain satisfied with their decision.

Contrary to speculation in late 2022 about a potential crash in home prices, such a decline did not occur. Although home prices have moderated from the peak levels seen during the "unicorn" years, prices are already rebounding in numerous areas today. Consequently, in most markets, it is expected that your home will continue to appreciate in value over the next year.

Renting, as an alternative to buying a home, has experienced a consistent increase in prices over the past few decades. Dealing with annual lease hikes offers no long-term financial benefit. Therefore, it is worth considering the advantages of buying a home rather than renting and enduring such fluctuations in rental costs.

In conclusion, when contemplating whether it is still a wise decision to buy a home today, it is essential to consider the remarkable long-term benefits of homeownership. If you are prepared to initiate the discussion and explore your options, I encourage you to connect with me today.