The Average Homeownership Duration Is Too Short To Build Real Wealth

How To Decide Whether To Buy Or Rent A Home

Between 2000 – 2009, the average homeownership duration was only about four years, too short to build real wealth. Thankfully in 2021, the average homeownership duration has risen to roughly eight years.

According to the US Census Bureau, only 37 percent of Americans have lived in their homes for more than 10 years. This is unfortunate, because in order to generate real wealth from real estate, you need to own your property for as long as possible.

The Average U.S. Homeownership Duration

Take a look at the chart below that shows the average U.S. homeownership tenure in years. As of Q2 2021, the average is around eight years. This is a big increase of only four years between 2000 – 2009.

The reason why the average U.S. homeownership tenure has increased is because Americans have wisened up to the fact that longer homeownership tenure is better for our finances.

Once the 2008-2009 housing crisis hit, U.S. homeowners stayed put longer because it also became harder to take out a mortgage. Lending standards tightened up and Americans were forced to be happy with the homes they already had.

As the economy and home equity recovered, Americans remained disciplined and continued to live in their homes for longer. As a result, the homeownership tenure continued to increase.

Now that there’s a pandemic in 2021-2021, the desire to own a home and stay in a home is even greater. We are all spending more time at home, which means renters are buying more homes and we are also buying larger homes.

The intrinsic value of a home has gone way up. How could it not if we are now spending 20% – 40% more time at home than we were pre-pandemic.

Why I Was Considering Selling

Back in 2012, I was considering selling a San Francisco house I bought in 2005. I tried, but couldn’t find any buyers! As a result, I refinanced the mortgage before negotiating a large severance, lowered my payment by 30%, and left Corporate America for good. Further, home prices have skyrocketed since.

It was only in 2021, 12 years after I bought the house, did I finally sell the property. I did so because the property had appreciated by over $1 million since 2012 and I wanted to spend more time being a first-time father.

If I didn’t have a son in 2021, I probably would have held onto my rental property today. Given interest rates have plummeted, the value of rental properties has gone way up because the value of rental income has gone way up.

I used $500,000 of the $1,800,000 in proceeds after paying off my mortgage and fees and invested it in real estate crowdfunding. My goal was to earn the same amount of cash flow as my rental ($60,000/year), but with $2,240,000 less exposure.

My favorite real estate crowdfunding platform is Fundrise. Fundrise has created diversified real estate funds the generates 100% passive income to investors. Its historical performance has been quite steady, especially during down years in the S&P 500. Fundrise is free to sign up and explore.

What Was Fundrise's Investment Performance in  2021?

Another area of opportunity, if you have the energy and time, is to buy more rental properties. It now takes a lot more capital to generate the same amount of risk-adjusted income. However, the value of rental properties haven’t gone up nearly as much.

As a father of two young kids under four, I’ve got my hands full. However, I do recommend everybody keep their eyes open for any good rental property deals.

Take Advantage Of Record Low Mortgage Rates

It is nuts how low interest rates have gone. It’s cheaper for me to live in a nicer single family home in 2021+ than it was back in 2005 thanks to rcod low mortgage rates.

I bought a home in 2021 with a 7/1 ARM at only 2.125% with minimal fees. Back in 2005, I had a 5/1 ARM with a 4.25% mortgage rate.

I encourage everybody to refinance their mortgage if they haven’t done so in the past six months.

My favorite mortgage lending marketplace is Credible. Credible has pre-qualified lenders competing for your business to provide you the lowest possible mortgage rate with the lowest possible fees.

It’s free to get a real mortgage rate quote. Take a look at how low the average mortgage rates have come down for a 5-year ARM, 30-year FRM, and 15-Year FRM.

Average Mortgage Rates

The median and average homeownership duration in America should continue to increase. Americans value their homes more and thanks to lower mortgage rates, owning a home has become more affordabl.

It wouldn’t surprise me if the average homeownership duration rises to 10 years by the year 2030. Hold onto your homes and prosper!

Updated for 2021 and beyond

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