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The Dream and Reality of Home Ownership

April 17, 2018

Owing a home has been a fundamental part of the American dream since the early age of this great nation. It is not just the ownership of the asset that has motivated generation after generation; it is the sense of accomplishment, safety and wellbeing that comes along with owning your home. As families expanded and communities flourished, home ownership was both an objective and an enabler of their growth. With the alternating economic cycles, home ownership has experienced high and low peaks. What is odd, and frankly worrisome, is that despite the encouraging economic trends recorded in the past seven years, basically post-2008 mortgage crisis, home ownership has not bounced back like it could have.

 

Based on U.S. Census Bureau data, the national median home value in 1990 was $79,100; in 2000 it was $119,600 (+33.8% since the previous decade;) and, in 2010 it was $221,800 (+64.3% since two decades prior). Are you curious to know if American wages behaved similarly? Here’s your answer. The household median income in 1990 was $29,943; in 2000 it was $55,030 (+45.5% since the previous decade); and in 2010 it was $49,445 (+39.4% since two decades prior). That indicates home values/prices grew more than 64% since the ‘90s, but American incomes only grew around 45%. This phenomenon created discrepancies between what the housing prices are and what American consumers can afford. The gap has only continued widen in the past 8 years.

 

In 2016, Millennials represented a slim 32% of those qualified home buyers who became homeowners. This is the lowest percentage of age-peer adults from previous generations to achieve this milestone, since the late ‘80s. In 2017, the National Home Price Index rose by 6.3% (S&P CoreLogic Case-Shiller source); incomes, on the other hand, grew around 3.3% with the rate of inflation around 1.2%. Do not be deceived by press that says Millennial renters are disinterested in home ownership and that they value life style more than ownership, (intended as renting luxury condos vs. buying starter homes). Millennial renters, just like any young adults who have preceded them, would like to own a home but are faced with challenges that others did not find on their path: substantial student loan debt to repay, stagnant wages, and rising home prices in the metro markets where they live and work. Understandably, saving for a down payment is very difficult under these circumstances. Similarly, the wealth in the home for Baby Boomers has grown exponentially in this recovery over the years, but were they able to save and diversify outside of their home?

 

We realized these challenges years ago, and the inception of EquiFi took place. Limited availability of liquidity, disparity between what is offered by the market and what can be afforded by consumers, as well as the deepening of the gap between wages and home prices were the main factors that we considered. Achieving home ownership should not be seen as an out-of-reach goal, but for many it feels that way. We want to work with those consumers who are qualified but need a little boost to afford the place that is right for them. We also want to work with those consumers who have done a great job at building wealth in the home but have not cultivated much wealth outside of their home. Our equity co-investment has the potential to move forward the life of many consumers who are somewhat trapped in their circumstances. The equity funding instrument is designed to liberate us from excessive debt, as well as promote a healthy and balanced home ownership for consumers. Thanks for visiting our page! See you here in a few days.

 

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Author of the Post

Laura is a member of the EquiFi leadership team.

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