The path to homeownership can be bumpy. Buyers must withstand bidding wars, contingencies, complex tax laws and an array of market factors beyond most anyone’s control. Still, buying a house is typically the single best investment a family can make.
Homeownership is, in fact, the largest source of wealth creation in the United States, while the median net worth of the average American homeowner is more than 40 times that of the average renter.
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A decision of this magnitude comes with a number of potential hurdles, and it’s immensely important to get the decision right. Certified housing counselors and agents who are Realtors can help ensure consumers do just that. The primary motivation for buying a home in the United States differs from person to person. For many, it's financial — an opportunity to grow home equity and lock in a stable monthly housing payment. For others, it's emotional — a chance to build roots, create stability and feel more connected to their community.
In Bankrate's March 2023 Financial Security survey, 74% of respondents ranked homeownership as a key component of the American dream.
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A report released in April by the National Association of Realtors analyzed how homeowners across income levels have increased their net worth in recent years and decades. Between 2012 and 2022, the median value of homes owned by lower-income Americans climbed 75% — a gain of roughly $100,000. Middle-income homeowners saw their properties appreciate 68% over the same period — equivalent to a wealth increase of $122,000.
Today, home equity is the largest financial asset for American households in the middle three quintiles of the income distribution, accounting for between 50% and 70% of this group's total net worth.
Making a mortgage payment each month is, in many ways, comparable to contributing to a stable savings account. Homeowners chip away at their loan balance and increase their claim on the home's overall value in the process. Many Americans who bought a median-value home 10 years ago and stayed consistent with their monthly payments have already paid off over 20% of their mortgage.
Unfortunately, many Americans today feel that their homeownership dreams are beyond reach. Current homeowners may be celebrating the growth in the value of their homes, but aspiring buyers may view that widespread price appreciation as one more factor keeping them renting.
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All Americans deserve the opportunity to achieve their homeownership dreams and build lasting wealth. To help make this possible — especially as housing markets across the country slowly become more buyer-friendly — prospective buyers can take advantage of several resources.
First-timers can benefit from connecting with a certified housing counselor. These trained agents with the U.S. Department of Housing and Urban Development can help prospective home buyers plan for future home purchases and get their finances mortgage-ready.
Agents who are Realtors can also help people navigate the home-buying process. They're uniquely positioned to leverage their knowledge of a local market, extensive networks and down payment assistance programs to open doors to affordable housing opportunities. It's no wonder nearly nine in 10 successful home buyers enlist the help of a real estate agent or broker.
There are also government loans and vouchers available through the Federal Housing Administration and the Housing Choice Voucher homeownership program.
Many states also have programs that create homeownership opportunities. Be sure to check your state's Housing Finance Agency for state-specific programs, information and advice.
What You Can Negotiate When Buying a Home
Everyone deserves safe, quality housing at a price they can afford. Even when the market seems complex, challenging or overly competitive, prospective buyers can still obtain their own piece of the American Dream, capitalizing on the resources available through real estate professionals and the array of valuable programs they support.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
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FAQs
One of the biggest advantages of owning a home is that you're not spending money on rent every month. Money that goes toward rent is unrecoverable. If you put that money toward a mortgage, however, you're working toward fully owning something tangible that can increase in value over time.
Is buying a house a smart investment? ›
On average, most homes appreciate or gain value at a rate of around 3.5% or 4% per year, which makes real estate investing a good way to increase your net worth.
Is buying property a good investment? ›
Even so, buying a home can still be a good investment due to factors like appreciation and equity building. While home appreciation is not guaranteed, investing in real estate is typically less volatile than investing in the stock market.
Is buying a house a good way to build wealth? ›
Instead of throwing rent money out the window each month, owning a home allows you to build home equity. And over time, equity can turn your mortgage debt into a sizeable asset.” Basically, the wealth you accumulate when you own a home has a lot to do with equity.
Is it really worth buying a house? ›
If you're in a financial position to do so and ready to stay put for at least a few years, buying a house is totally worth it. You'll gain stability, build equity and a retain sense of ownership and control, rather than being at the whim of a landlord.
What's the point of owning a house? ›
A home offers a physical and emotional haven from the outside world and may provide a sense of security and stability that is more challenging to replicate in a rental property. Owning a home means having a safe space for oneself and loved ones, creating a feeling of belonging and fostering a sense of well-being.
Is it smarter to buy a house or rent? ›
Owners come out ahead of In at least seven major cities in California, long-term renting is cheaper than owning a home. Renters save $900,540 on average in California over a 30-year period. in at least 51 U.S. cities. On average, owners saved $175,811 over a 30-year period.
Is it smarter to buy a home? ›
Lifestyle Considerations
Renting a home provides much more flexibility. However, if you have returned to the office, either full time or partially, and assume you'll remain in your current job for a few years, then buying a home might be wiser.
What's a better investment than a house? ›
As mentioned above, stocks generally perform better than real estate, with the S&P 500 providing an 8% return over the last 30 years compared with a 5.4% return in the housing market. Still, real estate investors could see additional rental income and tax benefits, which push their earnings higher.
What is the best age to invest in property? ›
Buying at the age of 30-45
Most people are pretty settled in their careers between 30-45 and have significant money to buy a house. Moreover, the salary would be higher compared to an early age, and the person may get a good deal on a home loan from a bank for 20-25 years.
an investment in which you do not make a profit, or make less profit than you hoped: Property has proved to be a bad investment over the last few years.
Does your home make you wealthy? ›
Buying and owning a home can lay the foundations of generational wealth. Home equity can increase substantially over time as you pay down your mortgage and your property's value appreciates.
What is the fastest way to build wealth in real estate? ›
So let's jump into how to build wealth with real estate.
- Property Appreciation. One of the easiest ways to build wealth through real estate is through property appreciation. ...
- Rental Income. ...
- Leverage. ...
- Tax Benefits. ...
- Flipping Properties. ...
- Buy and Hold. ...
- Real Estate Can Bring Long-Term Wealth.
Your house is probably your most valuable asset, and may simultaneously be your biggest liability. The more equity you have in your home, the more it will increase your net worth. Keep in mind that when you determine your net worth, you must subtract your liabilities—including your mortgage.
How is a house an investment? ›
The benefits of investing in a home include appreciation, home equity, tax deductions, and deductible expenses. Risks of investing in a home can include high upfront costs, depreciation, and illiquidity. A home can be a good long-term investment but building equity is key.
How to take advantage of owning a home? ›
Tax benefits.
If you itemize deductions on your federal tax return, the U.S. Tax Code lets you deduct the interest you pay on your mortgage, your property taxes (up to $10,000 according to current tax law), and some of the costs involved in buying a home.
What is usually an advantage of homeownership? ›
1) Financial stability
In terms of both lifestyle and monetary stability, buying a home provides a new sense of reliability to first-time homeowners. In some cases, mortgage payments paid monthly may be less expensive than some rental rates. (Hello, savings!) This is because inflation affects the price of rent.
