In the face of increasing mortgage rates, looming inflation, and recession rumors, many potential homebuyers find themselves asking: is buying a home in this climate a wise move? This year certainly brings its own set of challenges for buyers. However, the long-term rewards of homeownership should not be overlooked when contemplating this decision.
Think about those in your circle who purchased a home 5, 10, or even 30 years ago. Chances are, you'll struggle to find anyone who regrets that choice. The secret behind this satisfaction lies in the appreciating value of homes over time and how this growth catalyzes your personal wealth accumulation. This might be why, according to a recent survey by Fannie Mae, 70% of respondents believe that buying a home is a secure investment.
Let's delve into how the value appreciation aspect of home ownership can significantly accumulate wealth over the years.
The map below presents data from the Federal Housing Finance Agency (FHFA), spotlighting the impressive price gains over the past five years. Considering the varying price trends across regions, the map provides a regional breakdown, helping illustrate larger market tendencies.
Looking at the percent change in home prices, you'll see that, on average, home prices rose by just over 56% nationwide over a five-year period.
Some regions deviate slightly from this average, but overall, home prices have gained solid footing in a relatively short period. By expanding this time frame, the benefits of homeownership and the striking gains homeowners have made over the years become even more apparent (see map below):
The second map illustrates that home prices, on a national scale, appreciated by an average of over 290% over approximately a 30-year span.
This average paints a picture of a typical homeowner who bought a house 30 years ago and saw their home almost triple in value during that period. This element of wealth growth is a critical reason why so many homeowners who purchased their homes years ago remain content with their decision.
There were whispers in late 2022 about an impending crash in home prices, but that prediction did not materialize. Even though home prices have cooled from the record highs witnessed during the 'unicorn' years, they are already bouncing back in many areas today. Therefore, in most markets, your home should appreciate in value over the next year.
The alternative to buying a home is renting, but rental prices have consistently been on an upward trajectory for decades. Rather than grappling with annual lease hikes and gaining no long-term financial benefits, why not consider the possibility of homeownership?
If you're contemplating whether buying a home today still holds merit, it's crucial to remember the substantial long-term benefits that homeownership can provide. If you're ready to discuss this potential life-changing decision, don't hesitate to reach out. Let's connect and explore the possibilities.
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