By: Guest Author, Virginia REALTORS® Chief Economist, Lisa Sturtevant, PhD
June is National Homeownership Month which makes this month a great opportunity to examine what we know about the benefits of homeownership. One key benefit of homeownership is wealth accumulation. Homeownership and the resulting equity a homeowner builds up is the primary way in which most Americans accumulate wealth. Having access to housing wealth can support individual and family well-being because home equity can be accessed for a child’s college education, for emergency health or other life events, and to pay for living expenses during retirement years. This ability to tap into home equity can also be a way to increase individual economic well-being by using equity to invest in another property (e.g. a rental property) or for home renovations which can increase the home’s overall value.
According to research from the National Association of REALTORS®, the typical U.S. homeowner who purchased his home 30 years ago experienced a gain of more than $240,000 in the form of housing equity. The wealth benefits were obviously smaller for homeowners who had been in their homes for a shorter amount of time, but even after just five years, the typical U.S. homeowner had accrued nearly $80,000 in housing equity.
Similar equity gains were experienced by Virginia homeowners. For example, the typical homeowner who purchased his home five years ago in the Richmond metropolitan area has gained about $67,000 in housing equity. In the Hampton Roads and Northern Virginia regions, the five-year gains have been about $80,000.
Compared to renter households, homeowners have significantly higher wealth levels. In fact, according to data from the Federal Reserve, the median wealth of a homeowner was over $230,000. The median wealth for renters was just $5,000.
There are a lot of reasons to become a homeowner—from the tax benefits of homeownership to a greater likelihood of being engaged in the community to positive educational outcomes for children to being able to paint the walls the color you like. The benefit of wealth accumulation is certainly a clear reason for many people to choose homeownership.
If you need any other information on the benefits of homeownership, please email me.
Happy National Homeownership Month!