The Joint Center for Housing Studies of Harvard University released a new paper titled “Update on Homeownership Trajectories through the Housing Boom and Bust” that examined the wealth-building impacts of homeownership from 1999 to 2013. Households who maintained or entered homeownership experienced increases in household wealth. The report also cautions that homeownership carries risks, especially for low income and racial minority households.
Households who were homeowners throughout the entire period from 1999 to 2013 had a median gain in wealth of $91,900. Households that successfully transitioned from renting to owning saw a median gain of $85,400. Households that owned, rented, and then owned again during the time period had a median wealth gain of $39,300. Households who started as owners and transitioned to renting had a median wealth loss of $47,500, but their net wealth remained similar to households who remained renters throughout period of the study. All races experienced wealth benefits from homeownership. Black homeowners, however, experienced smaller wealth gains per year of homeownership, up to $2,600 less per year, than white homeowners.
The report cautions that homeownership still carries risks, especially for low income and racial minority households. Among households who became homeowners during the 1999 to 2013 period, 79% of white households and 75% of black households were still homeowners in 2013. Only 60% of Hispanic households who had moved into homeownership were still homeowners in 2013. The authors noted this outcome could be due to the large population of Hispanics living in areas hit especially hard by the housing crisis, such as Florida, Arizona, and Nevada.
A smaller proportion of low-income households were able to remain homeowners. Among households who became homeowners during the 1999 to 2013 period, 61% of households with income lower than $40,000 were still homeowners in 2013, as compared to 70% of households with income between $40,000 and $69,000, 84% of households with income between $70,000 and $109,000, and 91% of households with income of $110,000 or more. These findings indicate the difficultly of maintaining homeownership among low-income households as compared to higher income households.
The report underscores the important role that homeownership plays in providing wealth-building opportunities, including for low income and racial minority households. The authors caution, however, that failed homeownership could damage a household’s credit and have other measurable costs that were not within the scope of the study.
Update on Homeownership Wealth Trajectories Through the Housing Boom and Bust is available at http://bit.ly/1XOXYPM