Did you buy a house before 2022? If the answer is ‘no,’ you’ll likely be on the wrong end of financial inequality over the next decade — this is why

You should consider yourself lucky if you purchased a house prior to 2022.

The rise in mortgage ratesCombining with high housing prices in many markets, housing affordability is rapidly becoming difficult to afford.

While everyone is struggling, the situation is especially acute for first-time buyers — and it’s preventing them from building the kind of financial security that comes with owning a home.

And since homeownership is the primary source of wealth for most families, it’s only serving to exacerbate a wealth gap between those who own homes and those who don’t.

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How did we get to this point?

Housing prices fell 33% in the United States during the Great Recession. The historically low interest rates that followed provided a great buying opportunity.

The value of owner-occupied homes climbed again in the decade preceding the pandemic. According to A.P.T., home values increased by more than $8 trillion in nearly 100 metropolitan areas. report from the National Association of Realtors.

It was the very low interest rates of the pandemic year that encouraged a boom, which in turn led to a rise in house prices. spike to historic levels in many areas — and pushing homeownership out of sight for many.

Since the outbreak of the pandemic, home ownership costs have risen to unprecedented levels. According to Zillow’s August housing report, the monthly mortgage payment on a typical home bought in 2022 has almost doubled since 2019, going from $897 to $1,643.

That makes it doubly hard to actually get your footing on the property ladder, if you aren’t already. It also means that those who bought their property before the pandemic demand caused prices to soar have a lower mortgage payment, and very likely, a lower locked in interest rate.

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They’re paying that much less every month for housing than the person who bought during the pandemic, or since interest rates began rising in mid-2022.

The gap is increasing

This means that the net worth of homeowners rises much faster than for non-homeowners.

However, the gap was already significant. According to A.A., the median household net worth of homeowners was 40 times greater than that of renters prior to the pandemic. surveyReleased by the Federal Reserve in 2020

According to the data, American homeowners had a median net wealth of $250,000 before the pandemic. Renters had only $6,300.

Now, there’s likely a much greater difference thanks in part to home equity and rental prices.

Nearly half of American homeowners were considered “equity rich” by mid-2022, according to ATTOM’s U.S. Home Equity and Underwater report.

It’s the highest percentage ever seen, said Rick Sharga, executive vice president of market intelligence at ATTOM, which collects housing data from markets across the country. Equity rich is when your loan amount on your house exceeds half of its estimated market value.

But it’s concentrated in certain areas

But not every corner of the countryEqually affected has been the West. The West contains eight of the 10 most equity-rich States, while the Midwest and South contain 12 of the 15 states with lowest equity-rich households.

In major metros, the rental prices have also skyrocketed.

According to Zumper online apartment search engine, the average rent in New York City for a one-bedroom is close to $4,000. That’s a year-over-year jump of 20%. In San Francisco, the average one-bedroom is $3,000 — 10% higher than last year.

If you’re paying rent in a major city, it’s going to be hard to save for a down paymentIt will also make homeownership more accessible.

It makes sense that those who own homes and have bought them in the right time will continue to increase their net worth. While people who haven’t bought will continue to fall behind — especially if they live in an expensive city.

What is the best way to purchase property?

Of course, not all real estate investments can be made by buying single-family homes or condos.

Real estate moguls still find effective ways to invest their millions amid high inflation and an uncertain economy.

Prime commercial real estate, for example, has outperformed the S&P 500 over a 25-year period. The help of new platformsThese opportunities are available to retail investors. These opportunities are not exclusive to the super-rich.

With a single investment, investors can own institutional-quality properties leased by brands like CVS, Kroger and Walmart — and collect stable grocery store-anchored income on a quarterly basis.

This article does not constitute advice and is intended to provide information only. It is not a warranty.