Homeownership is an essential part of the American Dream.
Using data from the 2015 Survey of Income and Program Participation, two U.S. Census Bureau researchers found that homeownership is the top contributor to household wealth in the U.S.
“It is one of the primary ways that households in the United States build wealth, full stop,” Ralph McLaughlin, chief economist and SVP of analytics at Haus, told Inman.
And while barriers like rising home prices have made achieving the dream of homeownership more challenging, there are several reasons why it shouldn’t be given up on, monetary and otherwise.
Monetary benefits of homeownership
Even with rising purchase prices, oftentimes, owning still stands as a better investment option than renting, Ali Wolf, chief economist at Zonda, told Inman.
While renting, Wolf explained, tenants are exposed to potential annual rent increases. On the contrary, homeowners with locked-in mortgages pay the same monthly rate for the life of their loan, unless they decide to refinance.
“In a rental home, the individual has little say over the annual rent increases. For homeowners, those that lock in a fixed-rate mortgage know what their monthly payment is for the life of the loan. If interest rates go down, the homeowner can refinance and get more money back in their pocket,” Wolf said.
Ali Wolf
Another major benefit of homeownership is the ability to build wealth over time. Consistent home price growth throughout the pandemic has created a ton of equity for homeowners across the country. According to CoreLogic’s recent Homeowner Equity Report, from the first quarter of 2020 to the first quarter of 2021, homeowners with a mortgage gained an average of $33,400 in equity.
“Obviously there’s been ups and downs in terms of the value, but real estate over the years, in terms of appreciation, has been a good investment,” Melissa Cohn, an executive mortgage banker with William Raveis Mortgage, told Inman.
In addition to building equity, homeownership can also reduce tax burdens, McLaughlin explained. Those tax incentives can include the mortgage interest deduction, which allows homeowners to count the interest they’ve paid against their taxable income, and the SALT deduction, which allows homeowners to deduct what they’ve paid in local taxes on their federal tax returns.
“For many people, owning a home isn’t about getting a better return than the stock market or alternative investments,” Wolf said. “Owning a home is about putting down roots. The financial aspect is an added benefit.”
Non-monetary benefits of homeownership
First and foremost, homeowners have the freedom to do what they want with their houses, and they don’t have to answer to landlords. With that freedom, McLaughlin said, comes the pride of ownership.
“That is the confidence, the esteem, the emotions, the feelings of owning a home,” he added.
Homeownership gives people a great responsibility, Cohn said. The responsibility of upkeep benefits the neighborhood by preserving its integrity, and paying a mortgage helps homeowners maintain better credit.
“And I think that we learn continuously that having good credit is super important to anyone’s ability to borrow money not just for a house,” she said.
Ralph McLaughlin
Another positive of homeownership, is the growing ability for homeowners to look for homes outside of the markets they work in.
“The pandemic brought upon a systemic shift in remote work trends. Owning a home is often less flexible than renting but in today’s economy, switching a job doesn’t necessarily mean you have to move anymore,” Wolf said.
And for those still opting to lease because of the ability to be mobile, technology is elevating ownership to a similar level.
At an Inman Connect session earlier this month, Knock Chief Executive Officer Sean Black forecasted that within five to 10 years buying and selling a home will look a lot like booking a short-term rental on Airbnb.
Of course, the process of buying a home is much more complex than leasing, with multiple parties involved, but the ability to bridge all, if not most, of those processes into one digital database will transform the way homeowners buy and sell forever.
It’s all about having a seamless, digital experience, Black explained, from the search to the financing, to the closing. The more frictionless the transaction process becomes, the more accessible homeownership will become for people who move around frequently.
