The Impact of Homeownership
Posted August 9, 2022 in Special Features
It is becoming clearer that changes to the housing market brought on by the COVID- 19 pandemic will be felt for decades to come. In the past 2.5 years, many Americans have bought or sold a home and moved to a new area of the country. This domestic migration along with the large millennial generation becoming active homebuyers has led to an acceleration of home values and a hot housing market. This trend is starting to normalize with pending home sales declining 8.6% in June 2022 from the month prior as escalating mortgage rates and rising housing prices impact potential buyers according to the National Association of REALTORS®. Homes were still 80% more expensive in June 2022 compared to June 2019, and in June 2022, the median home price jumped to $416,000 while year-over-year existing home sales declined 14.2%. Rather than being viewed as a declining market, the argument can be made that the market is resetting to a new normal after two record-setting years.
Despite periodic market fluctuations, homeownership is the primary source of wealth creation among families and results in many economic and societal benefits. “Over the past 10 years, at the national level, a homeowner who purchased a single-family existing home 10 years ago would have gained $229,400 in home equity if the home were sold at the median sales price of $360,700 in 2021 Q4. Home prices rose at a strong annual pace of 8.8% annually, yielding a pure gain due to a price appreciation of $209,400.” (NAR). Homeowners generally put down roots in a community and are more politically involved. “A study by Glaeser and DiPasquale found that 77 percent of homeowners said they had at some point voted in local elections compared with 52 percent of renters.” (NAR) A homebuyer is not simply buying a home, but investing in a community, building generational wealth, and creating a reciprocal relationship.
A quote from a REALTOR® member from the National Association of REALTORS® outlines this perfectly. “The most important color in real estate is green. Real estate is a strong foundation for wealth creation. As an investor who has happens to be a member of 2 minority groups (black & woman), I have chosen real estate to successfully create generational wealth for my family, as well as an income.” (Stacey Johnson-Cosby, NAR member). The wealth effect that real estate investment can have impacts both current and future generations. Homeownership clearly yields both monetary and societal benefits.
The community benefits of homeownership are just as extensive as those directly to the family. It is important to remember that new residents indirectly fund infrastructure projects throughout the community in a variety of ways. In the State of Washington, builders are charged impact fees when a permit for a home is issued. These fees pay for new capacity for a variety of services, including but not limited to: schools, parks, and transportation improvements. It follows that greater amenities can be offered to residents when the community grows – something that benefits longtime and new residents alike. Moreover, the economic impact of the real estate industry in Washington State is massive. “The real estate industry accounted for $108.3 billion or 16.2% of the gross state product in 2021.” (Economic impact of a typical home sale, NAR). The total economic impact of a typical home sale generated an additional $187,600 spread throughout industries both within and outside the real estate industry putting Washington 5th in the country for the highest economic impact. Typically, one new home is constructed for every six existing home sales. This additional construction is essential for Washington State, which suffers from the worst underproduction of housing in the nation – underproduction which is driving the cost of housing out of the grasp of many. Our state has the fewest number of households to housing units in the country – a critical short and long-term issue for our communities.
Buying a home is the biggest purchase most folks will ever make in their life – and we as a community must prioritize homeownership opportunities and the benefits they create.
Government Affairs DirectorClark County
Association of REALTORS®