Hint: It has to do with a big trend in the housing market.
Many people don’t stop to contemplate their net worth on a daily basis. But generally, your goal should be to see that number rise over time. New data reveals that buying a home could be a good way to meet that objective.
Rising home values have fueled an uptick in net worth
This year, home values have soared to record high levels as limited inventory, and low mortgage rates have driven prices up. But even before the pandemic-fueled inventory crunch, home values were on the rise.
The median net worth of U.S. households grew from $103,000 in 2016 to $127,000 in 2019, according to the Mortgage Bankers Association’s (MBA) Research Institute for Housing America. That’s an increase of 17.6%, and the highest gain noted since 2007.
The MBA also notes that rising home values were a heavy contributor to an increase in middle class wealth during that time. Interestingly, that doesn’t even account for this year’s sky-high home values.
Now to be fair, stock market values have also contributed to a higher net worth among Americans. But still, this data clearly makes the case that homeownership can be a smart financial move — one that lends to stability and, in time, more wealth.
Should you buy a home?
A home can be regarded as an investment or as an expense — it largely depends on how you see things. Buying a home means taking on the risk that it will require a lot of maintenance and repairs — factors that could eat into your net worth rather than help increase it.
But on the flip side, home values do have a tendency to rise over time. Buying a home is often regarded as a sound financial decision. If you rent a home rather than own one, your rent payments will be an expense — not an investment.
Still, that doesn’t make homeownership the automatic right choice for everyone. For some people, budgeting for the peripheral costs of homeownership, like property taxes and maintenance, can be tricky. Those who struggle with it may make the decision to rent instead.
Plus, to get a mortgage, you generally need to make some sort of down payment on a home. Tying up that money in a single property could mean having less money to put into the stock market, which is another solid way …….