Homeownership, Still Part of the American Dream
Homeownership is part of the American Dream. It often marks a milestone for individuals and families as they take on property that is their own. According to Statista, homeownership has been on the rise since 2017, and industry experts expect the number of U.S. homeowners to grow. One factor driving growth in the homeowner market – millennials are getting older and starting to grow their families. As the generation gets older, they’re looking for more space that allows them to enjoy the comforts and convenience of a suburban lifestyle.
Interestingly, COVID-19 stay-at-home orders and work-from-home arrangements could also influence more individuals to explore homeownership, according to real estate experts. Society’s understanding of what personal space can be used for has expanded. A new precedent has been set for workspace and our tie to traditional offices. Pair all this with historically low mortgage interest rates, reported by Freddie Mac, and it’s an exciting time to work with individuals taking steps toward owning their own home.
The historically low mortgage interest rates make the dream of homeownership and building wealth more attainable to a more significant number of families and individuals. According to the Consumer Financial Protection Bureau, saving even a fraction of a percent on mortgage interest rates can generate thousands of dollars in savings throughout the course of a loan. The low rates also mean it is more affordable for families to borrow money. With mortgage interest rates near the lowest point they have been since the 1970s, many potential buyers are further encouraged that now is the best time to enter the real estate market.
Further supporting the desire to build wealth, a Forbes article recently reported a typical homeowner would be ahead of an average renter on a lifetime financial achievement scale by a multiple of 45, based on a medium figure. The financial implications of homeownership can also include tax benefits and building equity that help accumulate wealth as we age, according to Moving.com – part of the Realtor.com network. Homeowners also foster a sense of financial stability as monthly housing expenses can remain fixed depending on the type of mortgage compared to renting.
Another significant influence on the resurgence in the desire for homeownership stems from the mandated stay-at-home orders as a result of the Coronavirus pandemic and the realization of the health benefits related to homeownership. According to Sold.com, having a fixed monthly housing payment lowers homeowners’ level of stress – which can affect both mental and physical health – as they no longer worry about the ups and downs in the real estate market. The fixed monthly payment can also enable homeowners to make better financial plans that can further increase their sense of security and lower stress. Additionally, unlike a renter, homeowners have greater control over their environment as they have the flexibility to choose what products are used both in the home and on private outdoor space. The importance of outdoor living space has been stressed by numerous organizations that have stated spending time outside has a dramatic effect on relieving anxiety, stress and depression.
Homeownership also supports the growth of communities and the American economy. According to the National Association of Realtors (NAR), one job is created for every two existing homes purchased. NAR also reports that approximately $60,000 is contributed to the economy from each home sale. As homebuyers want to make renovations or home improvements to tailor a house to their needs, they hire contractors, purchase building materials and other products that boost the local economy. Those professionals then spend more money in the community at restaurants, sporting events, movies and other activities. The desire for new furniture, window coverings, carpets and other housewares further drives money to local businesses, that lead to increased job creation in the community.
This domino effect can even have a positive influence on safety and activism in communities. As more members of a community attain homeownership, they also become more invested in the local region, leading to a reduction in crime. The Forbes article also stated homeowners are more likely to be active in the community through volunteering, local elections and civic engagements compared to renters who prefer the flexibility and ability to relocate easily.
Ultimately, there are many factors for the resurgence of interest in homeownership. This includes Americans re-evaluating their housing options after more than two months of mandated stay-at-home orders across the nation. At the same time, the millennial generation continues to become more settled in their careers as they move into the 30-40 age demographic, so they have naturally started exploring homeownership as the next step toward their American Dream and building personal wealth.
What is clear is that with interest rates on 30-year fixed-rate mortgages hitting an all-time historic low, now is an ideal time to consider a first-time home purchase, refinancing or moving to a more spacious home. According to Freddie Mac, the unprecedented rates are impacting purchasing demand, which has rebound from a 35% year-over-year decline in mid-April to approximately an 8% increase more recently. As more homebuyers take advantage of these extremely low interest rates, this will boost the economy and help lead to a faster recovery.