The path to homeownership can be bumpy. Buyers must withstand bidding wars, contingencies, complex tax laws and an array of market factors beyond most anyone’s control. Still, buying a house is typically the single best investment a family can make.
Homeownership is, in fact, the largest source of wealth creation in the United States, while the median net worth of the average American homeowner is more than 40 times that of the average renter.
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A decision of this magnitude comes with a number of potential hurdles, and it’s immensely important to get the decision right. Certified housing counselors and agents who are Realtors can help ensure consumers do just that. The primary motivation for buying a home in the United States differs from person to person. For many, it's financial — an opportunity to grow home equity and lock in a stable monthly housing payment. For others, it's emotional — a chance to build roots, create stability and feel more connected to their community.
In Bankrate's March 2023 Financial Security survey, 74% of respondents ranked homeownership as a key component of the American dream.
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A report released in April by the National Association of Realtors analyzed how homeowners across income levels have increased their net worth in recent years and decades. Between 2012 and 2022, the median value of homes owned by lower-income Americans climbed 75% — a gain of roughly $100,000. Middle-income homeowners saw their properties appreciate 68% over the same period — equivalent to a wealth increase of $122,000.
Today, home equity is the largest financial asset for American households in the middle three quintiles of the income distribution, accounting for between 50% and 70% of this group's total net worth.
Making a mortgage payment each month is, in many ways, comparable to contributing to a stable savings account. Homeowners chip away at their loan balance and increase their claim on the home's overall value in the process. Many Americans who bought a median-value home 10 years ago and stayed consistent with their monthly payments have already paid off over 20% of their mortgage.
Unfortunately, many Americans today feel that their homeownership dreams are beyond reach. Current homeowners may be celebrating the growth in the value of their homes, but aspiring buyers may view that widespread price appreciation as one more factor keeping them renting.
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All Americans deserve the opportunity to achieve their homeownership dreams and build lasting wealth. To help make this possible — especially as housing markets across the country slowly become more buyer-friendly — prospective buyers can take advantage of several resources.
First-timers can benefit from connecting with a certified housing counselor. These trained agents with the U.S. Department of Housing and Urban Development can help prospective home buyers plan for future home purchases and get their finances mortgage-ready.
Agents who are Realtors can also help people navigate the home-buying process. They're uniquely positioned to leverage their knowledge of a local market, extensive networks and down payment assistance programs to open doors to affordable housing opportunities. It's no wonder nearly nine in 10 successful home buyers enlist the help of a real estate agent or broker.
There are also government loans and vouchers available through the Federal Housing Administration and the Housing Choice Voucher homeownership program.
Many states also have programs that create homeownership opportunities. Be sure to check your state's Housing Finance Agency for state-specific programs, information and advice.
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Everyone deserves safe, quality housing at a price they can afford. Even when the market seems complex, challenging or overly competitive, prospective buyers can still obtain their own piece of the American Dream, capitalizing on the resources available through real estate professionals and the array of valuable programs they support.
Disclaimer
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
FAQs
Purchasing a home can be regarded as a better use of your money than renting, investment-wise, because with the latter you don't build any home equity. Your monthly rent payment goes directly to the landlord, with no ownership stake being built over time.
Why is buying a house the best investment you will make? ›
Under the right circumstances, buying a house can be a good investment. Homes tend to appreciate in value over time and help create generational wealth. A house also provides a safe place to raise a family and can generate income as a rental property.
Which best describes why buying a home is an investment responses? ›
Which best describes why buying a home is an investment? When someone owns a home, he or she can generally sell it in the future for more than the original price. Which is one advantage of owning a home compared to renting a place to live? Homeowners can make a profit on the sale of their home.
Why is buying a home often a better investment than renting one? ›
Buying a home allows you to build equity over time. Unlike renting, where your monthly payments go toward the landlord's investment, each mortgage payment contributes to your ownership stake in the property. Over the years, this can result in significant equity that can be tapped into for future financial needs.
Why would I ever want to buy a house? ›
Investment: Real estate has historically been a reliable long-term investment. While there are no guarantees of property value appreciation, in many cases, homes have increased in value over time. This potential for appreciation can make homeownership a way to grow your wealth.
Is a house ever a good investment? ›
Is owning a house a good investment? In the long run, owning a home is a good investment. When you rent, your money goes to your landlord, whereas you can see a return on your investment over time when you put your money toward a home.
Why is owning a home better? ›
A home offers a physical and emotional haven from the outside world and may provide a sense of security and stability that is more challenging to replicate in a rental property. Owning a home means having a safe space for oneself and loved ones, creating a feeling of belonging and fostering a sense of well-being.
How can buying a house help you build wealth? ›
Homeownership promotes wealth building by acting as a forced savings mechanism and through home value appreciation. Wealth building hinges on the homeowners' ability to build home equity.
What is a benefit of buying a home rather than renting Quizlet? ›
The main advantages of owning a home is the financial benefit of the deductibility of mortgage interest and real estate tax payments, reducing federal income taxes. The main motives of many home buyers is stability of residence and personalized living.
Why is buying a house more beneficial than renting Quizlet? ›
Buying is a personal investment while renting involves giving money to the landlord. Buying is a personal investment while renting involves giving money to the landlord.
While owning a home is a big step that requires high upfront costs, there are plenty of long-term advantages that aren't always obvious. Aside from getting a place to call home, buyers also build equity, have predictable housing payments, and enjoy several other perks.
Does owning a home increase happiness? ›
Many studies over the years have shown that homeowners are, on average, happier than non-homeowners. In my own calculations, using the General Social Survey, 21 percent of people who own their home are “very happy,” compared with 16 percent of those who pay rent.
Why buy a house in life? ›
Advantages of homeownership
As you make payments, you gain equity. This means you'll eventually be able to sell the home for more than you owe. You can make changes to your home and the surrounding property. A home can be a good long-term investment.
Is real estate the best investment to make? ›
Real estate properties typically appreciate over time, increasing a real estate investor's profits, especially if you invest for the long term. You can turn property appreciation into cash flow by leveraging the profits with mortgage financing or selling the property for a profit.
Why real estate is the ideal investment? ›
Real estate promises to appreciate over the long term, offers an opportunity to collect rent for income, and allows investors to leverage borrowed capital to increase additional returns on investment. Above all, though, the diversification of assets is the surest way to guarantee a strong return on investments.
What is a better investment than a house? ›
Real estate investing may make sense if you want to own tangible assets and are willing to manage property. But if you prefer a more hands-off approach with more liquidity, stock market investing may be a better option.
Is buying a home a good idea? ›
Generally, if you intend to stay in a property for more than 2-5 years, it becomes more worth it to buy a house in California. Over this time, you will build equity and benefit from property appreciation. This point is often referred to as the 'breakeven horizon.
