The path to homeownership can be bumpy. Buyers must withstand bidding wars, contingencies, complex tax laws and an array of market factors beyond most anyone’s control. Still, buying a house is typically the single best investment a family can make.
Homeownership is, in fact, the largest source of wealth creation in the United States, while the median net worth of the average American homeowner is more than 40 times that of the average renter.
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A decision of this magnitude comes with a number of potential hurdles, and it’s immensely important to get the decision right. Certified housing counselors and agents who are Realtors can help ensure consumers do just that. The primary motivation for buying a home in the United States differs from person to person. For many, it's financial — an opportunity to grow home equity and lock in a stable monthly housing payment. For others, it's emotional — a chance to build roots, create stability and feel more connected to their community.
In Bankrate's March 2023 Financial Security survey, 74% of respondents ranked homeownership as a key component of the American dream.
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A report released in April by the National Association of Realtors analyzed how homeowners across income levels have increased their net worth in recent years and decades. Between 2012 and 2022, the median value of homes owned by lower-income Americans climbed 75% — a gain of roughly $100,000. Middle-income homeowners saw their properties appreciate 68% over the same period — equivalent to a wealth increase of $122,000.
Today, home equity is the largest financial asset for American households in the middle three quintiles of the income distribution, accounting for between 50% and 70% of this group's total net worth.
Making a mortgage payment each month is, in many ways, comparable to contributing to a stable savings account. Homeowners chip away at their loan balance and increase their claim on the home's overall value in the process. Many Americans who bought a median-value home 10 years ago and stayed consistent with their monthly payments have already paid off over 20% of their mortgage.
Unfortunately, many Americans today feel that their homeownership dreams are beyond reach. Current homeowners may be celebrating the growth in the value of their homes, but aspiring buyers may view that widespread price appreciation as one more factor keeping them renting.
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All Americans deserve the opportunity to achieve their homeownership dreams and build lasting wealth. To help make this possible — especially as housing markets across the country slowly become more buyer-friendly — prospective buyers can take advantage of several resources.
First-timers can benefit from connecting with a certified housing counselor. These trained agents with the U.S. Department of Housing and Urban Development can help prospective home buyers plan for future home purchases and get their finances mortgage-ready.
Agents who are Realtors can also help people navigate the home-buying process. They're uniquely positioned to leverage their knowledge of a local market, extensive networks and down payment assistance programs to open doors to affordable housing opportunities. It's no wonder nearly nine in 10 successful home buyers enlist the help of a real estate agent or broker.
There are also government loans and vouchers available through the Federal Housing Administration and the Housing Choice Voucher homeownership program.
Many states also have programs that create homeownership opportunities. Be sure to check your state's Housing Finance Agency for state-specific programs, information and advice.
What You Can Negotiate When Buying a Home
Everyone deserves safe, quality housing at a price they can afford. Even when the market seems complex, challenging or overly competitive, prospective buyers can still obtain their own piece of the American Dream, capitalizing on the resources available through real estate professionals and the array of valuable programs they support.
Disclaimer
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
FAQs
Equity. Purchasing a home can be regarded as a better use of your money than renting, investment-wise, because with the latter you don't build any home equity. Your monthly rent payment goes directly to the landlord, with no ownership stake being built over time.
Why is buying a house the best investment you will make? ›
Equity. Purchasing a home can be regarded as a better use of your money than renting, investment-wise, because with the latter you don't build any home equity. Your monthly rent payment goes directly to the landlord, with no ownership stake being built over time.
Is buying a house a good investment now? ›
While the housing market has its ups and downs, your house is likely to grow in value over the long term. In fact, the median home sale price has greatly increased in the past 13 years, going from $221,800 in 2010 to $425,150 in 2023. The value of your home typically rises as you pay off your mortgage.
How can owning a home be a great investment for the future? ›
One of the most compelling reasons to buy a home now is the opportunity to build equity over time. Unlike renting, where payments go to a landlord, mortgage payments made by homeowners build equity in the property. This equity is a valuable asset and part of your net worth.
Is real estate the best investment to make? ›
Real estate properties typically appreciate over time, increasing a real estate investor's profits, especially if you invest for the long term. You can turn property appreciation into cash flow by leveraging the profits with mortgage financing or selling the property for a profit.
Is it really worth buying a house? ›
If you're looking to stay somewhere for longer, you may opt to become a homeowner. “If you plan to stay in your home for more than five years, you will likely be better off financially owning your home compared to renting,” Daryl Fairweather, chief economist for Redfin, told Nexstar via email.
Why owning a house is a good idea? ›
There are several advantages to buying a house in California: Freedom to customize and invest in your property. Potential for substantial appreciation over time. Stability and potential tax benefits.
What age should I buy a house? ›
Most first-time homebuyers make a purchase when they are 35. Buying a house at a young age can mean building equity young and getting a home paid off sooner. Purchasing a house in your 20s or earlier can also mean you feel trapped, unable to move at a moment's notice.
Is it harder to buy a house now than in the Great Depression? ›
Conversation. The median annual pay during the Great Depression was 22% of the cost of an average home. Today, it's 14%. It's harder to buy a house today than it was during the Great Depression.
What does Warren Buffett think about real estate? ›
Warren Buffett generally buys real estate only in the form of real estate investment trusts (REITs). He sticks to stocks because he thinks they offer a more efficient way to build wealth. Still, when an opportunity presented itself for a 400-acre plot of Nebraska farmland – he couldn't turn it down.
On its own, real estate offers many benefits, such as cash flow, tax breaks, equity building, competitive risk-adjusted returns, and a hedge against inflation. There are many other ways why real estate is such a good investment, so if you are interested in doing so, start doing your research now.
Is buying a house a good investment in 2024? ›
Until supply catches up to demand, prices are unlikely to fall. Realtor.com estimates prices will fall less than 2% by the end of 2024. No one can predict exactly what the market will do, but if you're an optimist, there's reason to be hopeful that prices are reaching a plateau.
What type of house is good for investment? ›
The best investment property for beginners is generally a single-family dwelling or a condominium. Condos are low maintenance because the condo association takes care of external repairs, leaving you to worry about the interior.
Is $5000 enough to invest in real estate? ›
Embarking on a real estate investment journey with just $5,000 may seem daunting, but it is entirely possible. By educating yourself, exploring alternative investment options, leveraging partnerships and adopting creative strategies like crowdfunding and wholesaling, you can kickstart your wealth-building process.
What is the most profitable thing in real estate? ›
Here are the five most profitable real Estate ventures and the key factors and trends contributing to their success.
- Residential Real Estate Development. ...
- Commercial Real Estate Investment. ...
- Real Estate Crowdfunding. ...
- Real Estate Technology ( PropTech) ...
- Short-Term Rentals and Vacation Properties.
Unlike real estate, stocks are liquid and are generally easily bought and sold, so you can rely on them in case of emergencies. With so many stocks and ETFs to choose from, it can be easy to build a well-diversified portfolio.
Why real estate is the ideal investment? ›
Real estate promises to appreciate over the long term, offers an opportunity to collect rent for income, and allows investors to leverage borrowed capital to increase additional returns on investment. Above all, though, the diversification of assets is the surest way to guarantee a strong return on investments.
Why should you invest in your home? ›
You'll build equity instead of pay rent (and build wealth over time) The most significant benefit to owning a home is that your monthly living expenses are recoverable. The money you pay toward your mortgage each month reduces the amount you borrow from the lender to own your home.
What is the best investment? ›
Overview: Best investments in 2024
- High-yield savings accounts. Overview: A high-yield online savings account pays you interest on your cash balance. ...
- Long-term certificates of deposit. ...
- Long-term corporate bond funds. ...
- Dividend stock funds. ...
- Value stock funds. ...
- Small-cap stock funds. ...
- REIT index funds.
By focusing on buying homes priced 50% or more above the median, you're likely to encounter less competition and a reduced risk of entering bidding wars. Additionally, these higher-priced homes often trade at a lower price per square foot, offering potential savings in the long run.
