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Homeownership and Retirement Assets

Posted on: Friday, May 12th, 2017  //  under

The Center for Retirement Research at Boston University recently released a study on home equity and retirement assets. While their data is focused on how best to USE any equity, we here at the Minnesota Homeownership Center would like to focus on one of the overlooked items in their research:

 

For all but the highest 20 percent of income earners, homeownership equity is STILL the number one driver of wealth for American families.

 

The researchers conducted a “Survey of Wealth” of households ages 65-69 and found that for 80 percent of older households, equity in their homes accounts for the overwhelming majority of their total financial assets.

For low- to moderate-income earners, they found that homeowners generally held about $60,000 in home equity compared with about $5,000 in retirement savings. That’s 12 times as much in home equity as they have in all other financial assets, including savings and bank accounts.

For median income earners, the difference is not as dramatic as for low-mod income earners, but it’s still substantial. These households generally have about $105,000 in equity compared with only $40,000 in retirement savings.

Home equity and other savings even out for higher income earners; they generally hold about the same amount of value in their home equity as they do in all other financial and retirement assets. Only the top 20 percent of income earners hold more in financial assets than they have in home equity.

 

This disparity in wealth and asset accumulation between homeowners and non-homeowners becomes even more pronounced when we look at the disparity in homeownership rates between white and black households.

 

The White homeownership rate in the U.S. is around 70%, the rate for Blacks and Latinos is approximately 30 percentage points lower. The wealth gap between blacks and whites is much larger than even the wage or income gap. According to the Economic Policy Institute, average wealth for white families is SEVEN TIMES higher than average wealth for black families. Their research shows that more than one in four black households have zero or negative net worth (owe more than all of their assets are worth), compared to less than one in ten white families in the same situation.

That’s why we’re focused on ensuring that Minnesota’s communities of color have equitable access to the information necessary to move into homeownership and its wealth-building power.

 

Homeownership should never be considered a quick and easy way to get rich. Slow and steady wins the race when accumulating home equity. We have some suggestions about how to best accumulate equity – and real wealth – for you and your family:

  1. Make sure that you’re a successful homebuyer. Homebuyer education and counseling is available throughout Minnesota – and online – to help you understand, start to finish, how to purchase, maintain and pay off your own home. Education and counseling can also help you avoid scams and protect your savings. Our network of homebuyer educators and counselors work for non-biased, non-profit organizations who only want what’s best for you and your family when it comes to buying a home.
  2. Take advantage of any down payment or entry-cost assistance programs that you qualify for. Your Homeownership Advisor can see if you qualify for any of the dozens of programs available to Minnesota homeowners. Using down payment assistance can build equity faster and help you retain some of your own savings to put toward long-term homeownership success (repairs and upgrades), or even toward other long-term retirement-focused savings.
  3. Don’t rush into homeownership, but do remember that home equity takes time to build; most buyers will be making a mortgage payment for 30 years or more. Our consumer surveys and interviews here at the Center show that most potential buyers think they need near-perfect credit or substantial savings in order to purchase a home. While good credit and money management are extremely important to long-term homeownership success, nobody’s perfect.

Talk with a Homeownership Advisor today – you may be closer to buying your first home than you think!