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Dirk Swift on DPAs. Arizona School of Real Estate and Business “The Journal”. September 2020 (Article Part 3 of 3)

"WEALTH BUILDING THROUGH HOME OWNERSHIP"

by: Dirk Swift – Program Director, Home Plus

As real estate professionals, we know the differences between buying and renting are staggering. Yet there are many people in our communities that don’t understand the benefits of homeownership. 

According to the Federal Reserve Report on the Economic Well-Being of U.S. Households: 

  1. 93% of homeowners were satisfied with their overall housings vs. 74% of renters. Renters were also less satisfied with every aspect of their housing, including its cost.
  2. The current homeownership rates for individuals under the age of 29 is 26%. By age 60, that number increases to 85%.
  3. The top reason for remaining a renter was “Unable to afford the down payment” (62% of respondents).
  4. The racial and ethnic disparity of homeownership rates are stark at 71% for Whites, 50% for Hispanics and 48% for Blacks.
 

The disparities in homeownership rates among racial and ethnic minorities, as well as millennials, are disheartening. Aside from social benefits of homeownership (self-reliance, stability, and a greater commitment to the community), these groups are missing out on the economic benefit of building steady wealth through owning a home. Furthermore, studies like the Urban Institute’s Intergenerational Homeownership highlight the direct impact on both the parental homeowner and the future homeownership of their children.

The Federal Reserve’s Survey of Consumer Finances (SCF)* collects data across all economic and social groups. In their most recent survey, they report the average net worth of a homeowner was $231,400 vs. $5,200 for a renter. These numbers reveal the net worth of a homeowner is over 44 times greater than that of a renter. (Net worth is simply total assets minus total liabilities)

  • Owning a home is a great way to build family wealth. Homeownership is a form of forced savings; every time a mortgage payment is made you are paying down your mortgage and thus increasing the equity in the home. Combine the decreasing mortgage balance with an increasing home value and a homeowner’s net worth can build exponentially.
 
  • Using a very simple example, a homebuyer with a $300,000 mortgage, 100% LTV, 3.50% interest and using a conservative 3% appreciation rate would build over $79,000 in equity in five years. Furthermore, the earlier someone enters homeownership, the more powerful the impact of compounding is over time. There are many tools available to calculate this effect, one of which is the EssentIQ. To view this tool go to: HPAZ.link/tools
 

Wealth generation and education levels are the two primary factors to elevate an individual’s self-worth, improve their life opportunities, and in turn lift our communities. While we do not have a direct impact on education levels, we can make a meaningful impact on a family’s wealth through homeownership.

Homeownership and the accompanying wealth build-up must be open and available to all Arizonans. It is our responsibility as real estate professionals to do our part to educate our community on this generational changing opportunity. Conduits to homeownership, like the HOME Plus home buyer down payment assistance program, provide a way forward for those who see no visible path to owning a home.

FOUR THINGS TO KNOW ABOUT HOME PLUS

  1. HOME Plus is available in every Arizona County, City, Zip.
  2. No taxpayer dollars are used to fund this program.
  3. Program is continually funded without a sunset date.
  4. Streamlined process = no added delays for the buyer or seller.

The HOME Plus program is a true public / private sector partnership. We raise funds in the national capital markets and form partnerships with lending institutions to deliver the HOME Plus program throughout the State. No taxpayer funds are used for the HOME Plus program. The HOME Plus program is administered by the Arizona Industrial Development Authority (AzIDA), a nonprofit corporation and political subdivision of the State of Arizona, formed by the Arizona Finance Authority.

*To read more regarding the Survey of Consumer
Finances (SCF), visit: www.FederalReserve.Gov/SCF/

To view the article at ASREB, CLICK HERE


TO READ PARTS ONE AND TWO, CLICK BELOW…

PART 1 – MAY 2020, CLICK HERE

PART 2 – JULY 2020, CLICK HERE

 

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