Homeowner Net Worth Nearly 40x Greater Than Renters
New Study Shows Homeowner Net Worth Almost 40x Greater Than Renters
Deciding between renting and buying a home is a significant choice, and recent Federal Reserve data may tip the scales in favor of buying. According to the latest Survey of Consumer Finances (SCF), homeowners boast a net worth that is nearly 40 times larger than that of renters (see graph below):
Homeownership and Net Worth Growth
In the previous version of that report, the net worth of the average homeowner was roughly $255,000 and that of the average renter was $6,300. But in the release that just came out this year, the gap widened as homeowner net worth climbed dramatically. As the Survey of Consumer Finances (SCF) report says:
“. . . the 2019-2022 growth in median net worth was the largest three-year increase over the history of the modern SCF, more than double the next-largest one on record.”
Equity Growth and Buying Decisions
Despite the potential concern that the opportunity for rapid net worth increase has passed, it's essential to recognize that home values have historically risen over time. With housing supply still not meeting demand and expert predictions indicating continued, albeit slower, appreciation, buying a home remains a prudent choice for wealth accumulation.
Even now that mortgage rates are closer to 7-8%, prices are still rising in many areas of the country because supply is still low compared to demand. That’s why expert forecasts for the next few years call for ongoing appreciation – just at a pace that’s more typical for the housing market.
While it likely won’t be the record ramp-up that happened over the last few years, people who buy now should continue to grow equity in the years ahead. That means, if you’re ready and able to buy a home today, you’ll be making an investment that’ll help build your net worth in the long run.
Making the Right Choice
For those still deliberating between renting and buying, it's crucial to consider the long-term net worth implications. Homeownership is not only a place to live but also an investment that can contribute to your financial growth. While the explosive growth seen in recent years may normalize, the enduring trend of rising home values presents a compelling argument for buying a home. It's an investment with the potential to enhance your net worth substantially over time.
If you're ready to take the step into homeownership, it could be the move that shapes your financial future.
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