Between 2004 and 2016 home ownership dropped from 69.2% to 63.7% and many say that the American Dream is declining with it.
So why are fewer people buying homes these days, and what does it mean for America’s Paychecks?
Here are Five Fast Facts:
- 🦉The conventional wisdom - Owning a home and having a higher-than-average income go hand in hand. People who own their home typically have a net worth that is 40 times higher than people who rent! So, what comes first? Is it being wealthy or owning a home?
- 💰Home Owners “Appreciate” the Value of Their Property - The reason home ownership is so important for building wealth is primarily because of something called appreciation – your home’s value generally goes up (or “appreciates”) by 3-5% each year even though your payment stays the same. So, renters spend money every month but don’t gain any long-term benefit to their wallet.
- 📈Rising Prices Drives Ownership Down - The biggest reason renters aren’t buying homes right now is high housing prices. In the last decade the median price of a home increased by 85%. At the same time, incomes have only increased by 17%. Experts say housing costs should not be more than 30% of your income, leaving many people far short of affordable housing.
- 🏠 Home Ownership is Good for Everyone - Our society encourages home ownership with things like tax breaks on interest paid to mortgages. This is partly because it’s generally better to have people building their own wealth instead of being dependent upon government programs or landlords for housing.
- 🌲Pain in Washington (state) - The pain of expensive housing prices can be felt all over the country, but one particular example is in Washington state. The recent boom in tech jobs helped incomes rise by 7.7% in the Evergreen State but housing prices also increased by 22%. Add to this the fact that supply is so low there’s 10% fewer homes than are needed.
🔥Bottom line: Housing is a basic requirement for life, but higher housing prices mean fewer and fewer regular Paychecks can afford to buy homes and build wealth for their own.
What’s the housing price situation in your town? What should be done to fix this problem?
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