Leave a Message

Thank you for your message. We will be in touch with you shortly.

The Dramatic Impact of Homeownership on Net Worth

The Dramatic Impact of Homeownership on Net Worth

If you're trying to decide whether to rent or buy a home this year, here's a powerful insight that could give you the clarity and confidence you need to make your decision.

Every three years, the Federal Reserve releases the Survey of Consumer Finances (SCF), which compares net worth for homeowners and renters. The latest report shows the average homeowner’s net worth is almost 40X greater than a renter’s (see graph below):

 

One reason a wealth gap exists between renters and homeowners is because when you’re a homeowner, your equity grows as your home appreciates in value and you make your mortgage payment each month. When you own a home, your monthly mortgage payment acts like a form of forced savings, which eventually pays off when you decide to sell. As a renter, you’ll never see a financial return on the money you pay out in rent every month. Ksenia Potapov, Economist at First Americanexplains it like this:

“Renters don’t capture the wealth generated by house price appreciation, nor do they benefit from the equity gains generated by monthly mortgage payments . . .”

The Largest Part of Most Homeowner Net Worth Is Their Equity

Home equity does more to build the average household’s wealth than anything else. According to data from First American and the Federal Reserve, this holds true across different income levels (see graph below):

 

The green segment in each bar represents how much of a homeowner's net worth comes from their home equity. Based on this data, it's clear no matter what your income level is, owning a home can really boost your wealth. Nicole Bachaud, Senior Economist at Zillowshares:

“The biggest asset most people are ever going to own is a home. Homeownership is really that financial key that helps unlock stability and wealth preservation across generations.”

If you’re ready to start building your net worth, the current real estate market offers several opportunities you should consider. For example, with mortgage rates trending lower lately, your purchasing power may be higher now than it has been in months. And, with more inventory coming to the market, there are more options for you to consider. A local real estate agent can walk you through the opportunities you have today and guide you through the process of finding your ideal home.

Bottom Line

If you're unsure about whether to rent or buy a home, keep in mind that owning a home can increase your overall wealth in the long run, no matter your income. To discover more about this and the many other benefits of homeownership, let’s connect.

The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. The Home Run Team, Ltd. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. The Home Run Team, Ltd. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.


Recent Blog Posts

Single Women Are Embracing Homeownership

Homeownership is life-changing no matter who you are. Let's connect today to talk about your goals in the housing market.

What’s the Latest with Mortgage Rates?

Recent headlines may leave you wondering what’s next for mortgage rates.

What Every Homebuyer Should Know About Closing Costs

Before making the decision to buy a home, it's important to plan for all the costs you’ll be responsible for.

3 Helpful Tips for First-Time Homebuyers [INFOGRAPHIC]

If you’re worried about affordability today or the limited number of homes for sale, these tips can help.

What Are Experts Saying About the Spring Housing Market?

Here's what the professionals are saying about what’s in store for this season.

Does It Make Sense To Buy a Home Right Now?

Thinking about buying a home? If so, you're probably wondering: should I buy now or wait?

Homeowners Today Have Options To Avoid Foreclosure

While headlines may be calling attention to a slight uptick in foreclosure filings recently, the bigger picture is that we’re still well below the number we’d see in a… Read more

4 Tips To Make Your Strongest Offer on a Home

If so, you should know today’s market is competitive in many areas because the number of homes for sale is still low.

The Latest Trends in Housing [INFOGRAPHIC]

With the number of new listings going up and average days on market going down, buyers may have more options, but will still want to move fast.

Work With Us

We're fortunate to be able to do what we want to do every day, and what we want to do is help clients live a better, more secure life. Whether you're buying a home, looking to sell or relocate, or are an investor, we can help you. No agents will work harder for you, because to us, going to bat for you, isn't work. That's just what you do when you're a team.

Follow Me On Instagram