Thinking About Renting vs. Buying? Here’s Why Buying Could Be a Big Boost to Your Net Worth
Undecided on whether you should rent or purchase your next home? It’s a big decision, and one factor that might tip the scales is the way homeownership can impact your long-term wealth. Every three years, the Federal Reserve Board releases the Survey of Consumer Finances (SCF), showing just how much wealth renters and homeowners accumulate – and the difference is huge. On average, homeowners have nearly 40 times more wealth than renters. Let’s break down why that gap is so big and what it could mean for you.
Why Homeowner Wealth Has Grown So Much
In the last report, the average homeowner’s net worth was around $255,000, while renters averaged about $6,300. That’s already a big gap, but the most recent numbers show it’s grown even more as homeowners continue to build wealth, mainly through home equity.
Home equity is the difference between what your home is worth and what you still owe on your mortgage. Every mortgage payment and every increase in home value builds that equity, boosting your net worth over time. In recent years, a tight housing market with limited supply and strong demand pushed home prices up quickly, which means homeowners have been gaining equity faster than usual – translating into even more wealth.
Renting vs. Buying Right Now
If you’re weighing your options, here’s something to keep in mind: while inventory has increased a bit this year, many areas still have limited homes for sale, which means prices are likely to keep rising (though at a slower pace than during the pandemic). Even a more modest increase in prices could mean equity gains for you as a homeowner.
Ksenia Potapov, an Economist at First American, explains it like this:
“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 available homes vary a lot by area. That’s why it’s helpful to connect with a local real estate agent who knows the market in your neighborhood. They can give you insights on local trends and help you understand not just the financial side of homeownership but also other lifestyle benefits.
As Bankrate puts it:
“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’re on the fence about which is right for you, 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
Not sure if buying a home is the right move? Remember, if you can make the numbers work, owning a home can be a powerful way to grow your wealth over time. And if buying feels out of reach right now, let’s connect – there may be programs available that can help make homeownership possible for you.
