Do you know what real wealth is? The Webster dictionary defines wealth as - an abundance of valuable possessions or money. For many families, owning a home is the most valuable asset of ones personal portfolio. Over time the value of a home will typically increase in value, which produces additional future equity. When this equity is untouched over years, most families overall financial outlook is very positive. The writers of KCM Real Estate Blog states - The financial advantage to owning a home that’s often forgotten in the – 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. She explains: “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.”
What has this equity piece meant to homeowners in the past? ATTOM Data Solutions, the curator of one of the nation’s premier property databases, just analyzed the typical home-price gain owners nationwide enjoyed when they sold their homes. Here’s a breakdown of their findings: In 2020, home sellers nationwide realized a home-price gain of $68,000 on the typical sale, the highest level in the U.S. since at least 2005. Growth per year are as follows: 2016 - $28,000 2017 - $41,000 2018 - $48,500 2019 - $53,700 2020 - $68,800 The typical gain in the sale of the home (equity) has increased significantly over the last five years.The 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.
Bottom Line 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.