If youre trying to decide whether to rent orbuy a homethis year, heres a powerful insight that could give you the clarity and confidence you need to make your decision.

Every three years, theFederal Reservereleases theSurvey of Consumer Finances(SCF), which compares net worth for homeowners and renters. The latest report showsthe average homeowners net worth is almost 40X greater than a renters(see graph below):

One reason a wealth gap exists between renters andhomeownersis because when youre a homeowner, yourequitygrows 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, youll never see a financial return on the money you pay out in rent every month. Ksenia Potapov, Economist atFirst American,explainsit like this:

Renters dont 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

Homeequitydoes more to build the average households wealth than anything else. According to data fromFirst AmericanandtheFederal Reserve, this holds true across different income levels (see graph below):

The green segment in each bar represents how much of a homeowners net worth comes from their home equity. Based on this data, its clear no matter what your income level is, owning a home can really boost your wealth. Nicole Bachaud, Senior Economist atZillow,shares:

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 youre ready to start building your net worth, the current real estate market offers several opportunities you should consider. For example, withmortgage ratestrending lower lately, yourpurchasing powermay be higher now than it has been in months. And, with moreinventorycoming to the market, there are more options for you to consider. A localreal estate agentcan 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 otherbenefitsof homeownership, call me, Marie McLaughlin 727-858-7569.

SOURCE:https://www.keepingcurrentmatters.com/2024/01/11/the-dramatic-impact-of-homeownership-on-net-worth/