The Long-Term Benefit of Homeownership
Some people are wondering whether they should still purchase a home this year in light of the current housing market's softening, the rise in mortgage rates, and the intensifying economic worries. Although there are particular difficulties for homebuyers this year, it's crucial to consider the advantages of homeownership in the long run when making your choice.
Think about it: it's probably difficult to find someone who regrets buying a property if you know someone who did it five, ten, or even thirty years ago. How come? The explanation is related to how equity and wealth are built up when home values increase over time.
According to the National Association of Realtors (NAR):
“Home equity gains are built up through price appreciation and by paying off the mortgage through principal payments.”
Here is an example of how only the home price appreciation component might pile up over time.
Timely Home Price Increase
Even if the rise in home prices has slowed this year, recent years have seen a significant rise in property values. The chart below shows how significant those increases have been over the past five years using data from the Federal Housing Finance Agency (FHFA).
If you look at the percentage change in property prices, you can see that nationwide, prices increased by an average of over 64% during that time.
This implies that a house's worth might rise significantly in a short period of time. The advantage of homeownership and the significant gains you stand to make are further illustrated by extending that time frame (see the map below):
The second figure demonstrates that over an almost 30-year period, property prices countrywide increased by an average of more than 290%.
The average homeowner who purchased a home thirty years ago had their home almost triple in value over that time, according to the national average, even if home price increase varies by state and local location. This is the reason why homeowners who made their purchase of a home years ago are still pleased with it.
Home price growth is still anticipated to occur nationally in 2023, analysts say, even if it slows this year as the market cools. This means that even though the rate of increase will be less than it was at the market's peak frenzy when values surged, your house should still increase in value over the course of the upcoming year in most markets.
Renting is an option to buying a home, but rental costs have been rising for years. So why pay rent and resist yearly lease increases when there is no long-term financial gain? Instead, think about purchasing a home. It's a financial commitment toward your future that might position you for long-term success.
To sum up
Don't let the fluctuating economy thwart your aspirations. According to data, house values normally increase with time, which boosts your net worth. Let's talk right now if you're prepared to begin your road toward homeownership.