Investing For your Family’s Future

Homeownership is the American dream, and here at NPHS we offer many resources to help make that dream become a reality. Homeownership is a big step in life and also one of the largest investments and can lead to improved financial wellness and sustainability down the line. One of the big advantages of owning a home is an increase of inter-generational wealth, and increasing the financial security of your future. Imagine a young family that has just enough cash saved up to get a mortgage. As they build equity in their home over the years, they can borrow against that wealth to weather financial emergencies—a car breakdown, a medical crisis, or whatever it may be. By the time their child is ready to go to college, they can afford to send them off—likely adding hundreds of thousands of dollars to their lifetime earnings and launching them into an adult life debt-free.
 
A child born into a wealthy family, for example, is six times more likely to become a wealthy adult than a child who grows up poor. Homeownership has long been a central part of this equation. In 2016 , it was found that the average net worth of a homeowner was $231,420 while renters were at $5,200 according to the Urban Institute. The significance is even more staggering for people of color. Wealth from equity in a home constitutes 51% of total wealth of the average white household, but 71% for African American households. Essentially, if you are part of America’s fastest growing populations, it’s highly likely that without a home, you don’t have wealth.
 
Our resolve to bring about racial equity and social justice through our work will be unwavering. We renew our commitment to helping pave the way for more families of color to achieve the financial and social benefits of homeownership. We will challenge and stretch ourselves more than ever to create opportunities that elevate both economic and civic empowerment, enabling people to shape the decisions that affect their lives, elevate their voices, and access all the services they need.
 
What makes buying a home such a singular wealth-building method in the U.S. economy?
 
It appreciates.
If nothing else, it’s a fairly reliable long-term investment. For decades, home prices have appreciated annually at average rates from about 3% to 5%. While the mortgage payments remain the same, market prices tend to rise, creating valuable home equity that increases a family’s net worth.
 
Payments are fixed compared to renting.
Inflation alone pushes rents up over time — and if the neighborhood gets trendy, monthly rents can go through the roof.
But if you own your home (and you have a fixed-rate mortgage, which means your interest rates won’t change over the life of your mortgage), your monthly payment is a fixed cost. And as inflation rises, living in your home gets effectively cheaper over the long term
 
It is enhanced by leverage.
The unique power of this investment is that it appreciates based on the entire value of the home. Equity accumulates on not only what you’re able to pay, but also what you borrow. That means that rather than earning 4% appreciation on the $10,000 down payment you fronted—or $400—you build equity on the full $100,000 value of the house—$4,000—as if you had invested all of that money yourself. You leveraged your $10,000 into a $100,000 investment.
 
It is forced savings.
Lastly, paying off the balance of a mortgage month by month is a forced savings mechanism that builds equity at the same time. And when the mortgage is payed off, you have something to show for it: ownership of a house that you can sell.
 
For those of us concerned with tackling disparities, this season is a chance to reflect on the power of homeownership as a tool for advancing the economic security for all families. NPHS is here to open pathways to more families, especially those Americans long locked out of this wealth-building opportunity.