The old adage that buying a home is an investment in the future still holds true. For the most part.
That’s according to a new report from the National Association of Realtors, which found that total housing wealth rose $8.2 trillion from 2010 through 2020, with 6.3 million more new homeowner households.
A homeowner who purchased a typical single-family existing home 10 years ago at the median sales price of $162,600 is likely to have accumulated $229,400 in housing wealth, according to the report.
According to the NAR, that included nearly 980,000 middle-income households. Within that time frame, total housing wealth for that income group surged by $2.1 trillion.
The metro areas with the greatest increase in middle-income homeowners were Phoenix, Austin, Nashville, Dallas, Houston, Atlanta, Orlando, Portland (Oregon), Seattle and Tampa, the NAR said.
Also, as of the fourth quarter of 2021, the largest price gains (as a percent of the purchase price) over the preceding decade were in Phoenix-Mesa-Scottsdale (275.3%), Atlanta-Sandy Springs (274.7%), Las Vegas-Henderson-Paradise (251.7%), Cape Coral-Fort Myers (233.9%) and Riverside-San Bernardino-Ontario (207.6%).
"Owning a home continues to be a proven method for building long-term wealth," Lawrence Yun, NAR chief economist, said. "Home values generally grow over time, so homeowners begin the wealth-building process as soon as they make a down payment and move to pay down their mortgage."
But that wasn’t the case in every metropolitan area that was studied.
According to the report, a small percentage of U.S. markets recorded a decrease in middle-income homeowner households over the past decade, including New York-Newark-Jersey City (-100,214), Los Angeles-Long Beach-Anaheim (-73,839), Chicago-Naperville-Elgin (-34,420), Boston-Cambridge-Newton (-28,953), Detroit-Warren-Dearborn (-25,405) and Philadelphia-Camden-Wilmington (-22,129). Nevertheless, some markets saw housing wealth rise as home prices climbed, such as the Los Angeles metro area ($164.5 billion) and the New York metro area ($59.4 billion).
There was also disparity between the gains made by higher income and lower income homeowners.
The NAR found that of the $8.2 trillion amassed in housing wealth from 2010 through 2020, high-income homeowners claimed roughly 71% of all wealth accumulation. Among middle-income homeowners, total housing wealth jumped by $2.1 trillion, or 26% of the housing wealth gains, with nearly 980,000 additional middle-income homeowner households. Among low-income homeowners, housing wealth rose by $296 billion, or 4% of the housing wealth gain.
The same was true for the percentage of homeowners from the different economic classes.
According to the report, low-income homeowners also comprised a smaller fraction of all homeowners in 2020, at just 27.2%. That number is down from 38.1% in 2010, with nearly 5.8 million fewer lower-income households that were homeowners from 2010 through 2020. There were 979,143 more middle-income homeowners over this decade, but they consisted of a smaller fraction of homeowners in 2020, at 43%, from 45.5% in 2010. High-income homeowners made up a larger portion of owners, at 29.8%. This is an increase from 16.4% in 2010 and is 11.1 million more high-income households in 2020 compared to 2010.
Since the Great Recession, the NAR said, the homeownership rate has declined across all income groups, with the largest drop among the middle-income homeownership rate, which fell from 78.1% to 69.7%. Low-income households observed homeownership rates fall, but to a smaller degree – two percentage points – while high-income households saw declines at four percentage points.
"Homeownership is rewarding in so many ways and can serve as a vital component in achieving financial stability," said NAR President Leslie Rouda Smith, a realtor from Plano, Texas, and a broker associate at Dave Perry-Miller Real Estate in Dallas. "Now, we must focus on increasing access to safe, affordable housing and ensuring that more people can begin to amass and pass on the gains from homeownership."
