A home often represents about 90% of the total wealth of a household. Homeownership often has long been pointed to as a way to build wealth over the long run. It also could help narrow racial income and wealth inequity gaps, writes Gay Cororaton, senior economist for the National Association of REALTORS®, at the association’s Economists’ Outlook blog.
But how much wealth potential can you gain over time? Cororaton offers the following scenario: Take a homeowner who purchased a single-family existing home 10 years ago at the median sales price of $170,567, with a 10% down payment. Then, they sold the home at the median sales price of $315,700 in the fourth quarter of 2020. They would have built up a home equity gain of $176,123. Over a 30-year period, that would jump to $307,979, Cororaton notes.
“Wealth accumulation takes time, so the earlier households start owning homes, the greater the wealth accumulation,” Cororaton writes.
In some metros, homeowners are accumulating equity over a decade faster than others. For example, the areas that saw the greatest wealth gains from homeownership between the fourth quarter of 2010 and the fourth quarter of 2020 were:
- San Jose-Sunnyvale-St. Clara, Calif.: $929,471
- San Francisco-Oakland-Hayward, Calif.: $761,204
- Anaheim-Sta. Ana-Irvine, Calif.: $509,806
- Los Angeles-Long Beach-Glendale, Calif: $430,196
- San Diego-Carlsbad, Calif.: $427,896
- Urban Honolulu: $412,986
- Naples-Immokalee-Marco Island, Fla.: $379,243