If you are weighing the choice between renting and buying a home, a key factor to consider is the impact homeownership can have on your net worth.
The Federal Reserve’s Survey of Consumer Finances (SCF) provides a detailed look at the wealth gap between homeowners and renters every three years. The latest findings reveal that, on average, a homeowner’s net worth is nearly 40 times higher than a renters.
Why Is Homeowner Wealth So Much Higher?
In the prior SCF report, the average homeowner had a net worth of about $255,000, while the average renters was around $6,300. In the latest update, this gap widened even more, thanks to increased homeowner wealth. As noted in the SCF report:
“…the 2019-2022 growth in median net worth was the largest three-year increase in the history of the modern SCF, more than double the next-largest one on record.”
One main driver of this growth is home equity, which is the difference between your home’s value and your mortgage balance. Homeowners build equity by paying down their mortgage and benefiting from rising property values.
Over the past few years, home prices rose significantly due to a high demand for housing and limited supply. This imbalance led to higher home prices, faster equity gains, and, ultimately, greater net worth for homeowners.
Considering Renting vs. Buying? Here’s What to Keep in Mind
Although housing inventory has grown somewhat this year, it remains limited in many areas, and prices are expected to rise again, albeit at a more moderate pace. This could still mean potential equity gains if you buy now. As Ksenia Potapov, Economist at First American, explains:
“Despite the risk of volatility in the housing market, homeownership remains an important driver of wealth accumulation and the largest source of total wealth among most households.”
Of course, prices and inventory vary depending on location. That is where Scott and the Smolen Team come in. They can provide insights on local trends and the financial and lifestyle benefits of homeownership to help you make the best choice for your situation.
As Bankrate highlights: “Deciding between renting and buying a home isn’t just about cost — the decision also involves long-term financial strategies and personal circumstances. If you are on the fence, it may be helpful to speak with a local real estate agent who knows your market well. An experienced agent can help you weigh your options and make a more informed decision.”
Bottom Line
If you are deciding between renting and buying, remember that homeownership can be a powerful tool for building wealth. When you are ready to take the next step, contact Scott and the Smolen Team for expert guidance, local insights, and a trusted mortgage lender recommendation. They will be there to support you every step of the way!
