Buying a Home Means Building a Wealth
Every year, households across Southern California make the decision to rent for another year or take the leap into homeownership. They do this because they think that it is what makes the most financial sense from their earnings and savings. That equation will most likely take into consideration monthly housing costs, tax advantages, and other incremental expenses. Using these measurements, recent studies show that it’s still more affordable to own a home in Southern California than to rent.
There is, however, another financial advantage to owning a home that’s often forgotten in the analysis – the wealth built through equity when you own a home.
Odeta Kushi, Deputy Chief Economist for First American, discusses this point in a recent blog post. She explains:
“Once you include the equity benefit of price appreciation, owning made more financial sense than renting in 48 out of the 50 top markets, with the only exceptions being San Francisco and San Jose, Calif.”
The meaning of equity piece to homeowners in the past
ATTOM Data Solutions, the curator of one of the nation’s premier property databases, just analyzed the typical home-price gain owners nationwide enjoyed when they sold their homes. Here’s a breakdown of their findings: The typical gain in the sale of the home (equity) has increased significantly over the last five years.
CoreLogic, another property data curator, also weighed in on the subject. According to their latest Homeowner Equity Insights Report, the average homeowner gained $17,000 in equity in just the last year alone.
How does the future look for homeowners when it comes to equity?
Here are the seven major home price appreciation forecasts for 2021:The National Association of Realtors (NAR) just reported that today, the median-priced home in the country sells for $309,800. If homes appreciate by 5% this year (the average of the forecasts), the homeowner will increase their wealth by $15,490 in 2021 through increased equity.
As you make your plans for the coming year, be sure to consider the equity benefits of home price appreciation as you weigh the financial advantages of buying a home in Southern California over renting. When you do, you may find this is the perfect time to jump into homeownership.