Increase Family Wealth by Paying for Housing

Have you given it a chance to really sink in? How it affects your family wealth? The cliche that everyone has heard before. Unless you are living somewhere rent-free, you are paying a mortgage – yours or your landlord’s. Let’s dive deeper into that. When you buy your own home you create a “forced savings” allowing you to use your monthly housing costs to increase your family’s wealth.

Family Wealth Breakdown

If you have a mortgage, essentially the bank owns your home. Every month you make a payment on your mortgage, paying off a portion of the debt to purchase your home. Therefore, month after month, you own a little bit more of your home in the form of home equity. As the housing market goes up and down so does the value of your home equity.

Pulsenomics conducts surveys every quarter of a nationwide panel of over 100 economists, real estate experts, and investment and market strategists. The survey reflects their outlook on how residential home prices will appreciate over the next five years for their Home Price Expectation Survey (HPES).

The latest data from their Q1 2019 Survey revealed that home prices are expected to average 3.4% annual average growth through 2023.

How does this relate to you?

Let use the example from our last blog post. Take a median-priced home of $250,000 to calculate the impact on your family wealth. Let’s say that home was purchased in January of 2019. Based on just home appreciation alone, that same home should be worth approximately $258,500 by January of next year. Apply the same growth through 2023, as predicted, and your home value should be around $285,774. That’s a gain of $35,774!

Let’s take a look at the potential equity gained over the same period of time at higher price points:

Home equity makes up a large portion of a family’s overall net worth.

Let’s push this conversation into a slightly different direction. If you’re a buyer on the fence, do you buy now or wait two years? If you can afford the $250,000 house today, could you buy that exact same house for $17,289 more in two years? You’d have to save $17,289 and apply it to your purchase just to break-even with your purchasing power of today. You would also need to factor in the interests rates. While they’re slightly reduced due to the trade tariffs being discussed, they will rise again, especially if your plan is to wait a year or two. At that point, affordability starts to become a concern again.

The Bottom Line

This has probably raised your blood pressure a bit. There’s the hope of a brighter financial future but of course, there’s the stress of wishing you bought last year also. First things first take a step forward. Our job, as the professionals, is to stress over the details, so you don’t have to. Schedule a no-obligation appointment to get all your options on the table. We’re not just talking about your immediate plans, but building your family wealth for your family, your children’s future and how they, in turn, will learn from this experience to build and plan their future as they come of age. Whether it’s your first or your fifth home purchase, the laws and process have changed. They get updated continually and we stay on top of all the details to put you in the best position to make the decisions right for you and your family.

Let’s get together to make your plan a reality!

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