Home ownership has long been part of the American Dream. Personally, I believe it is an opportunity all should have in this country, but not a right. Along with being part of the American Dream, why is home ownership so important and how does it benefit our economy and citizens?
If you add up the sale of two new median priced homes it contributes $117,058 to the economy. Then calculate the Income per worker based on the GDP which is: GDP divided by the number of payroll workers, equals approximately $113,000 (see chart).
|Income from two home sales:||$117,058|
|Income per worker (GDP/worker):||$113,000|
|Workers per two home sales:||1.04|
In the eyes of the NRA this adds enough money into the economy to pay another worker. This is theoretical, but there is no denying that more transactions have a significant impact on job growth.
Homeownership also brings in taxes. Statistics say that 80 to 90 percent of federal income taxes are paid by homeowners.
I could continue to give you facts about how homeownership is such a large part of our economy and that alone is reason to consider buying a home or investment property, but let’s examine the effects on communities and people? Here are some of the measurable affects according to the NAR:
- Investment in the future – even with the sharp declines a typical homeowner who had purchased a home 8 years ago saw a median equity gain of 24 percent and owners who have been in their homes 11 to 15 years saw a median gain of 40 percent.
- Homeowners are happier, healthier and enjoy a greater feeling of control over their lives
- Stable housing costs- a fixed rate mortgage payment might not change for 15 or 30 years while rent will typically increase at 3 percent a year.
- Raising healthier children, statistics show that these children are more likely to participate in organized activities and spend less time in front of the television and video games
- Children of homeowners do better in school and stay in school longer
- Build stronger communities – volunteering and contributing to the homeowners neighborhood is increased
- More stable communities with less frequent moving
- Reduces crime
- Increases stability of finances – Home owners’ net worth ranges between 31 and 46 times more than that of renters
- Can also provide a hedge against inflation
- Tax Benefits – Mortgage Interest Deduction, Property Tax Deduction, Capital Gain Exclusion (at least for now)
- Building of Equity
People are also finding that due to the fall in home prices and increase in rents that it’s often cheaper monthly to buy a home than to rent.
We have seen a small drop in the homeownership rate however. It moved from 65.5 percent in the second Q of 2012 to 65.0 percent in the second Q of 2013. We’ll keep our eye on this indicator and see if it’s related to the market i.e.: harder for the first time home buyer to get into the market or is it because people are really happier renting. If it’s the latter does that mean that homeownership is less a part of the American Dream????
We can see the justification for homeownership, but what are the benefits to investors?
Adam Smith, an investor at the dawn of one of America’s biggest housing bull markets (1971) said to Dick Cavett – “ …the best investment is a house.” To which Cavett said “I already own a house. Now what?” Smith replied, “Buy another one.”
So do your part for your country, community and net worth – learn to invest in real estate at OTA Real Estate and then purchase a property or two.
Diana Hill – email@example.com