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A Homeowner’s Net Worth Is 40x Greater Than a Renter’s

October 7, 2020 By Tami Savage

A Homeowner’s Net Worth Is 40x Greater Than a Renter’s

One of the best ways to build your family’s financial future is through homeownership. Recent data from the Federal Reserve indicates the net worth of a homeowner is actually over 40 times greater than that of a renter. Maybe it’s time to start thinking about buying a home, especially when they’re so affordable in today’s market.

Every three years the Survey of Consumer Finances shows the breakdown of how owning a home helps build financial security. In the graph below, we see that the average net worth of homeowners continues to grow, while the net worth of renters tends to hold fairly steady and be significantly lower than that of homeowners. The gap between owning and renting just keeps getting wider over time, making homeownership more and more desirable for those who are ready.

creasing Gap in Family Wealth.  in 2010 the Renter was at $6,010 and the homeowner was at $203,850 with a $198k difference. In 2013 the renter wa at $5,930 and the owner was at $214,690 with a difference of $209k.  In 2016 the renter was at $5,320 and the owner was at $246,130 with a difference of $241k.  And in 2019 the renter was at $6,270 and the owner was at $254,900 with a difference of $249k.  The different in a decade is $51k.  Source:  Federal Reserve

Owning a home is a great way to build family wealth.

For many families, homeownership serves as a form of ‘forced savings.’ Every time you pay your mortgage, you’re contributing to your net worth by increasing the equity you have in your home (See chart below):

Homeowners have 40x greater net worth than renters.  Homeowner $120,000 home and $135,000 of other assets for a total of $255,000.  The renter only has OTHER assets, listed in this graphic as $6,300.  Source: Federal Reserve

The impact of home equity is part of why Gallup reports that Americans picked real estate as the best long-term investment for the seventh year in a row. According to this year’s survey, 35% of Americans chose real estate over stocks, savings accounts, gold, and bonds.

Today, there are great opportunities available for those planning to buy a home. The housing market has made a full recovery, and all-time low interest rates are giving homebuyers a big boost in purchasing power. If you’re ready, buying a home this fall can set you up to increase your net worth and create a safety net for your family’s future.

Bottom Line

To learn how you can use your monthly housing cost to build your family’s net worth, let’s connect so you have a trusted professional to guide you through the homebuying process.

Tagged With: First Time Home Buyers, For Buyers, Rent vs Buy

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