Many people who have been successful in building wealth and prosperity in the US will tell you that one of the greatest vehicles for creating wealth is ownership of property. It is often the first tangible investment that young people make. The age-old wisdom of parents and grandparents, many of whom grew up with tales of the Great Depression solemnly shared around the dinner table, sagely advised future generations that owning a home was a necessary move for financial security.
Why? Because a mortgage is essentially a forced “savings plan”, but instead of building up cash, you are building up equity. The equity is what’s left when you sell your home and pay off your mortgage. You are building your nest egg in two ways: 1) every mortgage payment is increasing your equity, as principle is paid down, and 2) as the value of your home rises. When you pay rent, you are paying someone else’s mortgage and and building someone else’s equity. Why not pay yourself? Now, there are certainly valid reasons for renting, but that doesn’t change the reality that paying rent is basically flushing money down a hole.
A recent study by CoreLogic found that homeowner’s equity had grown substantially in 2019. In the study, Frank Nothaft, Chief Economist for CoreLogic explained:
“The CoreLogic Home Price Index recorded a quickening of home price gains during the fourth quarter of 2019, helping to boost home equity wealth. The average family with a mortgage had a $7,300 gain in home equity during the past year, and a total of $177,000 in home equity wealth.”
Equity in a home is the foundation for family wealth because the home is often the largest single asset for many American families. As equity increases, the family’s net worth increases. Unfortunately, renters are left out of this benefit of home ownership. Instead, their landlord is reaping this benefit
Many experts agree that home value increases may slow slightly as the pandemic plays out. However, this situation is temporary, and once viable treatments and vaccines emerge, the robust housing market will resume throughout most of the U.S. In Fountain Hills, we are still seeing healthy interest is buying and selling, despite concern over the virus. The housing markets may even be a stabilizing force. So those stories you may have heard from parents and grandparents will be born out – owning a home is an important step to family wealth.
If you are thinking about buying or selling a home, we are here to help! Susan Pellegrini and Karen DeGeorge are ready to put their care and expertise to work for you. Buying or selling, our first-class service comes with a wealth of experience and eye for detail, ready to focus on you. Visit our website to learn more and contact us or give us a call at (480)- 315-1575, we’re here for you.