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Homeownership: Family Wealth

Posted by realtorjara on May 18, 2020
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Homeownership Family Wealth.

While growing up, we were taught by our parents and grandparents that owning a home is a financially savvy move. They explained how a mortgage is like a “forced savings plan.” When you pay rent, that money is lost forever. When you make a mortgage payment, much of that money accumulates as equity in the home. So, what exactly is equity? The equity in your home is the amount of money you can sell it for minus what you still owe on the mortgage. Every month you make a mortgage payment, and every month a portion of what you pay reduces the amount you owe. That reduction of your mortgage every month increases your equity. A recent study by CoreLogic explained that homeowners gained substantial equity over the last twelve months, and are essentially sitting on large sums of cash in their homes. In the study, Frank Nothaft, Chief Economist for CoreLogic explained:

“The CoreLogic Home Price Index recorded a quickening of home price gains during the fourth quarter of 2019, helping to boost home equity wealth. The average family with a mortgage had a $7,300 gain in home equity during the past year, and a total of $177,000 in home equity wealth.”

For most families, their home is their largest financial asset. This increase in equity drives the net worth, or family wealth, of the homeowner. Renters are not earning that benefit. Instead, they’re building the net worth of their landlord.

Bottom Line

Home price growth will moderate during the pandemic. But once a cure is available, most experts agree that home values will again begin to appreciate at levels similar to what we’ve seen over the last several years. In the long run, our family elders will be proven correct: owning a home is a savvy financial move.

The information contained, and the opinions expressed in this article are not intended to be construed as investment advice. Rafael Jarauta, Rafael Jarauta, PA or RealtyWonders.com, does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Rafael Jarauta, Rafael Jarauta, PA or RealtyWonders.com will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.

La información contenida y opiniones expresadas en este artículo no tienen la intención de ser interpretadas como asesoramiento en materia de inversión. Rafael Jarauta, Rafael Jarauta PA o RealtyWonders.com no tienen ni garantías de la información o integridad de la información u opiniones aquí contenidas. Usted debe siempre realizar su propia investigación y su debida diligencia y obtener asesoramiento profesional antes de hacer o tomar una decisión de inversión. Rafael Jarauta, Rafael Jarauta PA o RealtyWonders.com no son ni seran responsables por ningun dano o perjuicio relacionado con la información u opiniones contenidas en este sitio web.

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