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Study confirms link between homeownership and wealth building

Trend continues even during downturns

Homeownership as a wealth-building strategy was the subject of a paper The Harvard Joint Center for Housing Studies presented at a 2013 symposium. Now, the authors of that report revisited the topic using more recent data and lessons learned from the housing crisis.

Researchers report their updated analysis "upholds the bottom-line result from the earlier paper: that homeownership was associated with significant gains in household wealth, even when viewed across the tumultuous housing crisis period of 1999-2013."

In the earlier paper covering the 1999-2009 time period (before the downturn), the authors reached three key conclusions:

  1. Even during a time of excessive risk taking in the mortgage market and extreme volatility in house prices, large shares of owners successfully sustained homeownership and created substantial wealth in the process;
  2. Renters who became homeowners and sustained it through the period had some of the largest gains in wealth; and
  3. Renters who transitioned to ownership but failed to sustain it ended the study period with no less wealth than when they started.

The recently released JCHS working paper, Update on Homeownership Wealth Trajectories Through the Housing Boom and Bust, covers the period since 2009 through 2013. Those years include the times when house prices reached bottom (March 2011, according to CoreLogic's National Home Price Index) as well as much of the foreclosures and distressed exits from homeownership.

Commenting on its reports, the authors said, "Taken together, the study's findings of both the remarkably and persistently low wealth levels of the typical renter and the potential for wealth accumulation when homeownership is maintained underscore the need for policies both to support sustained homeownership as well as to help renters find ways to build wealth outside of homeownership."

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