How Home Equity Helps Build Wealth

Real Estate

Buying a home is more than just finding a place to live. It's an investment. Which means, as you pay down your mortgage and your home's value appreciates over time, you build up equity. In simple terms, equity is the difference between what you owe on your home and its current market value. It's also one of the primary arguments for homeownership and the reason it's seen as being a vital part of achieving the American Dream. In short, it helps Americans build wealth. For example, a recent analysis of the housing market over the past 10 years found that the average equity per borrower increased from around $75,000 in the first quarter of 2010 to $171,000 in the first quarter of 2019. Of course, the housing crash and subsequent price recovery has a lot to do with just how much equity homeowners were able to accumulate over the past 10 years. But, though those results may not be typical, they are a good illustration of how financially beneficial homeownership can be. By comparison, single-family rents increased 33 percent over the same time period. But rather than watching an investment grow, renters – unlike homeowners - gained nothing from that increase but a higher monthly payment. More here.