A recent housing report by the National Association of Realtors (NAR) has shed light on the wealth-building potential of homeownership, with middle-income homeowners accumulating an average of $122,100 in wealth over the last 10 years due to home appreciation of 68%.
The report, titled "Wealth Gains by Income and Racial/Ethnic Group," highlights the value real estate agents and Realtors bring to consumers in building generational wealth through buying and selling homes, the NAR said.
The report revealed that while homeownership can be a catalyst for wealth accumulation, there are substantial variations and inequalities in homeownership rates across different income and racial/ethnic groups. Low-income homeowners were able to build $98,900 in wealth from home price appreciation alone over the last decade, while upper-income households saw an increase of $150,800.
NAR Chief Economist Lawrence Yun commented on the findings, stating, "This analysis shows how homeownership is a catalyst for building wealth for people from all walks of life. A monthly mortgage payment is often considered a forced savings account that helps homeowners build a net worth about 40 times higher than that of a renter."
The report also highlighted the wealth gains and homeownership rates among different racial/ethnic groups. Black homeowners experienced the smallest wealth gains among any other racial or ethnic group, but were still able to accumulate over $115,000 in wealth in the last decade.
In a first for this report, NAR identified the Top 10 U.S. metro areas with the largest wealth gains for Black homeowners over the last 10 years. Bellingham, Wash.; Ocala, Fla.; Palm Bay, Fla.; Modesto, Calif.; Greeley, Colo.; and Charleston, S.C. were among the areas where more than 60% of Black households own their home, with owners in these areas accumulating over $125,000 in wealth in the last decade.
In addition to wealth gains, homeowners also saw their debt drop by 21%. Many homeowners who were able to refinance and secure a rate lower than 4% in the months following the onset of COVID-19 may have paid off an even larger amount of their mortgage, Yun noted.
The report also highlighted that homeowners in expensive metro areas experienced the largest wealth gains, regardless of income level. In the San Jose, Calif., metro area, low-income owners accumulated nearly $630,000 in the last decade, while middle-income owners gained $643,000. All of the Top 10 areas with the largest wealth gains for low-income owners, surpassing $290,000, were located in California.
In the Top 10 areas with the highest homeownership rates for middle-income households, owners gained an average of $110,000 in wealth over the last 10 years. For example, in Ogden, Utah, where 85% of middle-income households own their home, homeowners have built nearly $220,000 in wealth in the last decade.
Some notable areas with high homeownership rates for middle-income households include Port St. Lucie, Fla., where the homeownership rate was 83% and middle-income owners gained nearly $200,000 in wealth.
The metro areas of Barnstable, Mass., and Palm Bay, Fla., were some other areas where most middle-income households own their home and accumulated a substantial amount of wealth — over $170,000 — in the last decade.
In the areas with the highest homeownership rates for low-income households, wealth gains were $140,000 on average. In Prescott, Ariz., while more than two out of three low-income households (68%) own their own home, owners have built more than $200,000 in wealth in the last decade.
Barnstable, as well as the Florida metro areas of North Port, Port St. Lucie, Palm Bay, and Deltona, were other areas where most low-income households owned their home and accumulated a substantial amount of wealth — over $120,000 — in the last decade.
