Today’s higher mortgage rates, inflationary pressures, and concerns about a potential recession have some people questioning: why homeownership wins in the long run and whether they should still buy a home this year. While this year brings unique challenges for homebuyers, it’s important to focus on the long-term benefits of homeownership when making your decision.
Consider this: if you know people who bought a home 5, 10, or even 30 years ago, you’ll likely find very few who regret their choice. Why homeownership wins in the long run is largely because home values tend to grow over time, which in turn grows your personal wealth. In fact, a recent Fannie Mae survey found that 70% of respondents believe buying a home is a safe investment.
Here’s a closer look at how home price appreciation adds up over the years.
Home Price Growth Over Time
The map below uses data from the Federal Housing Finance Agency (FHFA) to show just how significant price gains have been over the past five years. Since home prices vary by region, the map breaks down trends by area to highlight larger market patterns.
If you look at the percent change in home prices, you’ll see that prices grew by just over 56% nationwide over the past five years. While some regions performed slightly above or below this average, overall, home prices gained solid ground in a relatively short time. Moreover, if you expand the time frame even further, the benefits of homeownership—and the significant gains homeowners have made—become even clearer (see map below).
The second map shows that, nationwide, home prices appreciated by an average of over 290% during a roughly 30-year period. This means the typical homeowner who bought a house 30 years ago saw their home nearly triple in value. This is a key reason why many homeowners remain happy with their decision long after buying.
While some predicted a home price crash in late 2022, it never happened. Although prices have moderated from the record highs of the ‘unicorn’ years, they are already rebounding in many areas today. As a result, in most markets, your home should continue to grow in value over the next year.
The alternative to buying a home is renting, and rental prices have been climbing steadily for decades. So why rent and face annual lease hikes without any long-term financial benefit? Instead, consider buying a home and building equity over time.