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Homeownership and Well-Being: A Complicated Relationship

Homeownership has come to represent security and wealth—the American Dream, realized, for millions who place their stake through property. There is evidence, even, that homeownership lends itself to overall satisfaction.

Financially, homeownership is also associated with well-being, according to a new report by the Consumer Financial Protection Bureau (CFPB). The CFPB defines “financial well-being” as “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future and is able to make choices that allow them to enjoy life.”

The first factor is key. The ability to afford a home affects sense of well-being, the report shows. The CFPB assigned respondents to a survey, on a scale of zero to 100, scores of well-being. In comparing homeowners and renters, homeowners averaged a 58, while renters averaged a 49. (As a whole, respondents to the survey averaged a 54.) Generally, Americans in good enough financial straits (in the context of income and savings) are in a position to purchase a home; the capacity to own, therefore, rather than ownership itself, is a predicator of well-being.

Affordability is also impactful in that those with a lower share of their income spent on housing have higher scores of well-being. Respondents paying more than 50 percent of their income on housing averaged a 46.5, roughly 10 points below the 56.51 of respondents who shell out 30 percent or less.

Respondents with “non-retirement investments” have higher scores of well-being, as well. (A house, often, is an appreciating asset, building wealth, as other investments do, over time.) Respondents with even one non-retirement investment averaged a 62, while those without averaged a 51. (Real estate, relatedly, has ranked as the No. 1 investment in several studies.)

“Housing satisfaction” is connected similarly. Respondents “very satisfied” with the place they live averaged a 60; those less than “very satisfied” averaged a 50. One distinction, however: The ability to improve level of satisfaction (buying in a more costly but safer neighborhood, for example) hinges on having the wherewithal to do so.

Financial well-being is also linked to homeownership in unanticipated ways. According to the report, age, education and physical health are the top three influences on financial well-being. Age has implications: Americans at a certain life stage, for instance, could be of the perception that “now” is the time to own a home. If they do not meet that expectation, their sense of well-being could suffer.

A cushion for emergencies, likewise, is related. Respondents with access to at least $2,000 for the unexpected (within 30 days) averaged a score of 62—leaps ahead of the 39 for those without. On the other side of the coin: Respondents who have experienced a “financial shock,” such as a major home repair, averaged a 52, while those who have not averaged a 57.

“The strongest relationships to financial well-being appear to be related to savings and security nets,” the report states. Homeownership, for most, is both—but its relationship to well-being? It’s complicated.

Source: Consumer Financial Protection Bureau (CFPB)

Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at sdevita@rismedia.com.

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