Homeownership is an important cornerstone of building wealth. If financial security is important to you, owning a home and building equity should be a top priority.
The Difference in Wealth Between Homeowners and Renters
Every three years, the Federal Reserve sponsors a research program that looks at the net worth of homeowners in the United States compared to renters. The report created is called the Survey of Consumer Finances, and the latest data (from 2019) has some staggering results.
The report shows a massive increase in the wealth gap between homeowners and renters. Back in 2010, the gap was $198,000 – meaning the average homeowner had $198,000 more wealth than the average renter. Fast forward to the most recent data from 2019 and you can see that that gap has increased to $249,000 – a 25% increase!
The report also compares the average net worth of homeowners and renters. In 2019, the average net worth of home renters in the United States was only $6,270. For homeowners, it was $254,900. This means the average homeowner in the United States is 40 times more wealthy than the average renter.
This wealth gap exists because of the equity owners build as their home appreciates in value and they pay off a portion of their mortgage each month. Home renters never see a return on the money they pay in rent. And with the incredible amount of home appreciation that has been happening over the last year and a half, that wealth gap is just going to increase – especially as rents continue to rise.
Conclusion
If you are on the fence about investing in real estate, or you are confused about the state of the housing market today, our advice is to look long-term. Pay attention to the gap in net worth between homeowners and renters, and think about the future implications of the decision to either rent or to buy.
If you have questions about the mortgage and real estate market – if you’re not certain of where the trajectory of the housing market’s going and you want a little bit more information then send us an email at TheInsightTeam@NEOHomeLoans.com to get started your process. We look forward to hearing from you soon!