Contemplating the choice between renting and buying a home? Consider this crucial insight to bolster your decision-making confidence. The Survey of Consumer Finances (SCF) by the Federal Reserve Board, updated every three years, reveals a substantial gap in net worth between homeowners and renters. Spoiler alert: the average homeowner’s net worth is nearly 40 times greater than that of a renter. Check out the supporting data in the graph below.
The Big Reason Homeowner Net Worth Is So High
In the prior iteration of the report, the average homeowner’s net worth hovered around $255,000, while the average renter’s was $6,300. However, in the most recent release this year, the gap expanded significantly, propelled by a remarkable surge in homeowner net worth. A major contributor to this surge is the substantial growth in home equity.
During the recent years, often referred to as the ‘unicorn’ years for the housing market, home prices experienced a remarkable surge. This surge was fueled by a scarcity of homes for sale, coupled with a substantial influx of buyers capitalizing on historically low mortgage rates. The resulting imbalance in supply and demand drove prices to unprecedented levels. Consequently, the majority of homeowners who owned property during that period witnessed substantial growth in their home equity.
If you find yourself in the midst of deciding whether to rent or buy, you might be questioning if you’ve missed out on a significant net worth boost. However, it’s crucial to recognize the following.
Historically, home prices have shown a consistent upward trend. Even with mortgage rates hovering around 7-8%, many areas across the country are still experiencing price increases due to a persistent imbalance between supply and demand. This is why experts anticipate continued appreciation in the coming years, albeit at a more typical housing market pace.
While it may not mirror the record surge of the past few years, individuals who make the decision to buy now can expect their equity to continue growing in the years ahead. This underscores that if you’re prepared and able to purchase a home today, you’re making an investment that will contribute to the long-term growth of your net worth.
Bottom Line
If you’re uncertain about whether to rent or buy a home, keep in mind that homeownership has the potential to enhance your net worth over time. If you’re interested in exploring the numerous other advantages of owning a home, feel free to reach out and connect with us.
