June marks National Homeownership Month, an annual observance aimed at promoting the benefits of homeownership and encouraging Americans to achieve the dream of owning a home. As we celebrate this important occasion, let’s take a closer look at the advantages of homeownership, as well as the challenges that many face in achieving this milestone.
BENEFITS TO HOMEOWNERSHIP
Homeownership is one of the most significant ways to build wealth over time. As property values appreciate, homeowners can enjoy a growing asset and a sense of financial security. According to the Federal Reserve, the median net worth of homeowners is $255,000, compared to $8,000 for renters.
Stability and Pride of Ownership: Owning a home provides a sense of stability and pride, as individuals have control over their living space and can make improvements to suit their needs. Homeownership allows families to create lasting memories and establish roots in their community.
Tax Benefits: Homeowners can enjoy tax deductions on mortgage interest and property taxes, which can help reduce their taxable income and save money on taxes. In 2020, homeowners claimed over $1.4 trillion in mortgage interest deductions alone.
Community Investment: Homeownership contributes to the growth and vitality of local communities, as homeowners invest in local schools, businesses, and infrastructure.
Long-term Savings: By avoiding rent payments and building equity, homeowners can save money over the long term and enjoy greater financial stability.
BARRIERS TO HOMEOWNERSHIP
Homeownership can be out of reach for many due to rising housing costs, including skyrocketing home prices, property taxes, and mortgage interest rates. In some areas, the median home price is well beyond the reach of the median-income earner.
Limited Access to Credit: Some individuals may struggle to secure mortgages due to poor credit, lack of credit history, or other financial barriers. According to the Federal Reserve, nearly 40% of Americans would not be able to cover a $400 emergency expense.
High Down Payments: Traditional mortgages often require a significant down payment, which can be a substantial hurdle for those with limited savings or financial resources. The median down payment for first-time homebuyers is around 5%, but some mortgages require as much as 20% down.
Student Loan Debt: The burden of student loan debt can make it difficult for young adults to save for a down payment, qualify for a mortgage, or maintain affordable monthly payments. In 2020, over 45 million Americans owed over $1.7 trillion in student loan debt.
Housing Market Inaccessibility: In many areas, the housing market is highly competitive, with multiple offers and bidding wars driving up prices and making it challenging for first-time buyers to enter the market. According to Redfin, the median offer-to-list-price ratio was 102% in April 2021, indicating a highly competitive market.
EFFORTS TO IMPROVE HOMEOWNERSHIP
Various government programs, such as the Federal Housing Administration (FHA) and the Department of Housing and Urban Development (HUD), offer mortgage insurance and assistance to low- and moderate-income households. These programs help make homeownership more accessible to those who may not qualify for traditional mortgages.
Down Payment Assistance: Many states and local governments offer down payment assistance programs, which provide grants or loans to help cover the cost of a down payment. In 2020, over 2.5 million households received down payment assistance.
Mortgage Credit Certificates: Some local governments offer mortgage credit certificates, which allow homeowners to deduct a portion of their mortgage interest from their federal taxes. This can help reduce the overall cost of homeownership and make it more affordable for those in higher tax brackets.
Homebuyer Education: Organizations such as the National Homeownership Strategy and the Homeownership Preservation Foundation offer educational resources and counseling to help prospective homeowners understand the process and prepare for the responsibilities of homeownership. Homebuyer education can help individuals make informed decisions and avoid common pitfalls.
Community Partnerships: Partnerships between local governments, non-profits, and businesses can help create affordable housing options and provide resources for first-time buyers. These partnerships can help address the affordability crisis by creating more affordable housing options and offering support to prospective homeowners.
Community Investment: Homeownership contributes to the growth and vitality of local communities, as homeowners invest in local schools, businesses, and infrastructure. Homeowners are more likely to be involved in their community and have a vested interest in its well-being.
Long-term Savings: By avoiding rent payments and building equity, homeowners can save money over the long term and enjoy greater financial stability. According to Zillow, the median homeowner saves over $15,000 per year by owning a home instead of renting.
National Homeownership Month serves as a reminder of the benefits and challenges associated with homeownership. While homeownership can provide a sense of stability, wealth-building, and community investment, it is essential to address the barriers that many face in achieving this milestone. By exploring government initiatives, down payment assistance, mortgage credit certificates, homebuyer education, and community partnerships, we can work towards making homeownership more accessible and affordable for all.
