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.


Recent Blog Posts

Stay up to date on the latest real estate trends.

San Francisco Market Update - December 2024

Elevated mortgage rates dominated the housing market in 2024, and 2025 may look similar if inflation starts to ramp up again.

East Bay Market Update - December 2024

Median home prices rose slightly in November, which is normal for the East Bay this time of year.

Control the Controllables If You’re Worried About Mortgage Rates

While you may be tempted to wait for rates to fall, it’s really hard to try and time the market — there’s just too much that can have an impact. Instead, set yourself … Read more

SF Market Update - November 2024

The median single-family home price rose 7.7% month over month, while condo prices increased 9.2%. We expect prices to contract over the next three months, which is th… Read more

East Bay Market Update - November 2024

Months of Supply Inventory still indicates a sellers’ market in the East Bay for single-family homes, but for condos, MSI implies the market now favors buyers.

Don’t Miss Out on the Growing Number of Down Payment Assistance Programs

Imagine being able to qualify for $17,000 toward your down payment—that’s a big boost, especially if you’re looking to buy your first home.

The Majority of Veterans Are Unaware of a Key VA Loan Benefit

According to Veterans United, only 3 in 10 Veterans realize they may be able to buy a home without needing a down payment.

Renting vs. Buying: The Net Worth Gap You Need To See

On average, a homeowner’s net worth is nearly 40 times higher than a renter’s.

San Francisco Market Update - October 2024

The median single-family home price rose 7.2% month over month, while condo prices increased 11.6%.

Let’s Talk

You’ve got questions and we can’t wait to answer them.