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How Home Value Growth Beats Renting

By
Real Estate Broker/Owner with Morningside Homes, LLC 720-231-5200 DRE# ER300941

 

Over the last 60 years, the average sales price of homes has appreciated at a rate of 5.56% annually, according to the Federal Reserve Economic Data. During the same period, rent has increased at a rate of 3.88% annually which presents a compelling argument in favor of homeownership.

When we analyze these figures, it becomes evident that homes have not only appreciated in value at a faster rate than the increase in rental costs, but they have also provided homeowners with a substantial asset that builds equity over time. This discrepancy in growth rates means that, in the long run, homeowners are likely to experience a greater return on their investment compared to renters.

Renters, while they may have the flexibility of moving without the ties of property ownership and might have lower upfront costs, do not gain any equity from their monthly payments. Their money goes straight to their landlord, and they are subject to the annual increases in rent. Over time, as rent continues to rise, renters might find themselves allocating a larger portion of their income to housing expenses compared to homeowners with fixed-rate mortgages, whose monthly payments remain constant.

Homeowners, on the other hand, can lock in their housing costs, particularly if they have a fixed-rate mortgage. Even as the value of their property increases, their monthly mortgage principal and interest payments remain steady. Furthermore, as they pay down their mortgage, they build equity in their home, which becomes a valuable asset. This asset can be leveraged for other financial opportunities, such as funding education, investing, or purchasing additional property.

In addition, homeowners can capitalize on the tax benefits associated with mortgage interest and property tax deductions, and potential capital gains exclusions, which can contribute to the overall financial advantage of homeownership.

In conclusion, while renting may offer flexibility and potentially lower upfront costs, homeownership presents a compelling long-term financial opportunity. The significant difference in the annual growth rates of home prices and rent over the past 60 years underscores the potential for wealth accumulation and financial stability that comes with investing in real estate and the equity building that comes with homeownership.

Download our Buyers Guide and consider getting together with your agent to get the facts of today's market.

Posted by

Buy or Sell with Patty Clark              Denver/Aurora Co. and surrounding areas 

Chris and Patty

Helping Families Move with Care

If you would like to be sent properties on a daily or weekly  basis just call or email me and let me know your wants and needs. A match will be made with a home you love and with monthly payments you can afford. I specialize in first time home buyers and sellers who are ready to downsize or move to a larger home as the family grows

Morningside Homes, LLC
patty@morningsidehomes.com
www.morningsidehomes.com
Cell: 720-231-5200                      
CRS,GRI,WCR,SFR,CNE, MRE

 

Comments (5)

Roy Kelley
Retired - Gaithersburg, MD

Home ownership continues to provide the best pathway to family health.

Feb 04, 2024 10:49 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Patty Clark you make very good points.  In my opinion there are many advantages to owning a home and very few for renting.

Feb 04, 2024 11:24 AM
Patty Clark

Agreed. Who wants to live year to year wondering if they have to move!

Feb 11, 2024 01:58 PM
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

Renting is paying off someone else’s Mortgage. Pay your own and gain Net Worth …..

Feb 04, 2024 12:02 PM
Patty Clark

Exactly. Landlords get the deductions a well as having their mortgage being paid off. Renters get nothing.

Feb 11, 2024 02:00 PM
Richard Weeks
Dallas, TX
REALTOR®, Broker
Great information, thanks for sharing.  I hope you have a great day.
Feb 05, 2024 04:09 AM
Patty Clark

Thank you.  I hope your year is what you want it to be.

Feb 11, 2024 02:00 PM
Ed Silva, 203-206-0754
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

Homeowners have the advantage of building equity in the home which is like a savings account and also at this time of ye look to the deductions that a renter never gets.

Feb 05, 2024 05:31 AM
Patty Clark

As long as the property is not being used as an ATM machine.

Feb 11, 2024 02:01 PM