Homeownership remains a key to building wealth. But a new study from the National Association of Realtors underscores the persistence of substantial inequities along racial and income lines over the past decade.
Home appreciation since 2012 was greater for higher-income homeowners than for lower-income homeowners.
Middle-income homeowners gained $122,100 in wealth, with homes appreciating 68% over the past decade, according to the report. Low-income homeowners were able to build $98,900 in wealth in that time from home price appreciation only, while upper-income households saw an increase of $150,800.
The study considered a household low-income if it earned an income no greater than 80% of the area median income. Middle-income homeowners are those with incomes over than 80% of the area’s median income but less than 200%. Upper-income homeowners are those with incomes greater than 200% of the area’s median income.
“This analysis shows how homeownership is a catalyst for building wealth for people from all walks of life,” said Lawrence Yun, NAR’s chief economist. “A monthly mortgage payment is often considered a forced savings account that helps homeowners build a net worth about 40 times higher than that of a renter.”
Black homeowners see smaller gains
It remains harder for Black homeowners to achieve the same wealth gains in homeownership that other groups do. Black homeowners experienced the smallest wealth gains among any other racial or ethnic group, accumulating $115,000 in wealth in the last decade. Black Americans own homes that are less expensive by nearly $64,000 than homes that White Americans own.
While Asian households own homes that are more expensive than any other group, Hispanic homeowners had faster appreciation than White homeowners.
But there were some areas of the country where Black homeowners fared better over the past decade, including Bellingham, Washington; Ocala, Florida; Palm Bay, Florida; Modesto, California; Greeley, Colorado; and Charleston, South Carolina. Owners in these areas saw their homes generated more than $125,000 in wealth in the last decade.
Owners from minority groups were able to accumulate the largest wealth gains in the West and South regions. In some of these areas, the median home value for Black homeowners is $500,000 more than it was a decade ago, including Bremerton, Washington; Santa Maria, California; and Lake Havasu City, Arizona.
Regardless of the income level, owners who live in expensive cities saw the most home price appreciation and wealth gains.
In San Jose, among the most expensive cities to buy a home, low-income owners have accumulated nearly $630,000 in the last decade, and middle-income owners gained $643,000. The top earners gained wealth of $836,490 from their homes.
Along with the wealth gains accumulated over the past decade, homeowners also reduced their debt by 21%. Many homeowners who were able to refinance and secure a rate lower than 4% in the months following the onset of the pandemic may have paid off an even larger amount of their mortgage, Yun said.
