Long-Term Benefits Of Homeownership

Finally, we have seen a little bit of cooling in the real estate market. From month-over-month price declines to slowing loan activity, the post-pandemic market is normalizing. Some serious questions that are now being discussed that seemed foreign 12 months ago. The main question out of all these questions include: should I buy with rising rates? Even though it has been a difficult and unique year for homebuyers, it is important to remember the impact in the long-term from homeownership. Long-term benefits of homeownership out-weigh the current prices to borrow (plus, we can potentially refinance). Here is what you should know about the long-term benefits of homeownership.

Homebuyers Today

Potential homebuyers look at the current landscape and think that owning a home is unreachable or not the best idea for their future. However, the long-term benefits of homeownership are seen when looking back into the past. If you were to survey homeowners who have been in their home for 5, 10, and even 30 years, you would probably find it hard to find someone who regrets it.

Some might wonder, why would it be hard to find someone with regret? Well, because long-term benefits of homeownership take years to emerge, not months. With a myopic view on real estate, you might think high rates and high prices are going to lead to a crash. However, even if there is a ‘correction’ in the coming months, real estate is still up tremendously in the past 5, 10, and especially 30 years. The reason is would be hard to deny the long-term benefits of homeownership is because of an often forgotten term: equity. The reason most homeowners would not regret the purchase is because they gain equity and wealth through monthly payments, price appreciation, and supply constraints. According to NAR (National Association of Realtors),

“Home equity gains are built up through price appreciation and by paying off the mortgage through principal payments.

Long-Term Benefits Of Homeownership Facts

To put some statistics and a pretty graph to words, look at this graphic of home prices throughout America over the past half-decade. Even though we have seen the deceleration in home price appreciation, prices are still elevated. Home values have significantly jumped throughout the nation throughout the past years. The map below uses data pulled from the FHFA (Federal Housing Finance Agency). The data shows that home prices have done nothing but increase in recent years. No region has seen a decrease, and the average increase is 63.5%. Imagine buying something in this current economic landscape that can almost guarantee a return in the following 10 to 30 years.

Long-Term Benefits Of Homeownership

The percent change in home prices over the past five years make a solid case for homeownership.

Now, let us put this into perspective. While real estate in America is as solid as it gets, there are short-term corrections based on economic events. However, if you look back 30 years, there is a clear sign that real estate is the best investment. Since 1991, home prices in America have increased drastically. Some states have seen over 500% increases in home prices. On the low side, every state has seen over a 150% increase in home values. While the current environment might try to influence you in thinking 150% is not great (shoutout to Wall Street Bets), this is astounding gains. Imagine owning a home in 1991, at say $100,000. In Louisville, KY alone, that $100,000 would now equate to $347,000. All you did was buy and maintain your place of residence.

Long-Term Benefits Of Homeownership

And looking at the past 30 years, the percent change in home prices are astonishing.

Real Estate Is Still #1

While homeownership might seem unattainable at the current day, remember that over 30 years, it will be hard to lose money. There has been no 30-year period in history where real estate prices in America have not increased. This is a very settling statistic for those homebuyers that are on the fence about buying. There may be some short-term economic pain, but for those who buy and hold for 5, 10, and 30 years, it could very well be a solid investment. Remember, past performance does not guarantee future results, but a lack of housing in America is on your side. Long-term benefits of homeownership out-weigh the short-term risks.