Setting the Record Straight: Part 1

This is the first blog in a series in which we refute common misconceptions about homeownership.

Theory 1: Homeownership is not a reliable wealth building strategy for lower- income families.

There has been debate about the wealth- building effects homeownership offers lower- income people. However, data from the Community Advantage Program shows that “when low- and moderate- income families purchase homes they can afford with mortgages that are sustainable, wealth happens.”

This is supported by the Community Action Program’s (CAP) rates of equity appreciation relative to other investments in which low- to moderate- income families could have put their down payment funds. Home equity gains are a primary factor of wealth building and give home owners an advantage over renters. As the foreclosure crisis was beginning to unfold from 2005 through 2010, homeowners saw an average gain in net worth of more than $11,000, while the matched sample of renters only gained an average of $742. It is also interesting to note that non- housing wealth grew faster for owners than for renters over this period, and there was no significant increase in liabilities for owners compared to renters.

It is also important to state that homeownership doesn’t just generate wealth, but it can also act as a buffer against losing wealth in tough economic times. Measuring from 2005 to 2010, home owners were able to retain greater net worth through the financial crisis.

CAP also found that homeownership has a significant beneficial effect on financial satisfaction and overall stress. The statistics show that homeownership truly is an effective means of long- term wealth building for working families, even in times of economic upheaval.

For more statistics from the UNC Center for Community Capital, click here.