Hey, if you're torn between renting or buying a home this year, I've got some great insight that might help you make up your mind with confidence.

Every three years, the Federal Reserve puts out the Survey of Consumer Finances, where they look at the net worth of homeowners and renters. The newest report reveals that the average homeowner's net worth is nearly 40 times higher than that of a renter. It's a pretty big difference, as shown in the graph below.

Hey, have you ever wondered why there's such a big difference in wealth between renters and homeowners? Well, it's because when you own a home, your investment grows as your house increases in value and as you make your mortgage payments each month. Essentially, it's like putting money into a savings account with each payment. However, when you rent, you're essentially paying someone else's mortgage without building any equity for yourself. It's like throwing money away each month. This is why Ksenia Potapov, an economist at First American, puts it this way.

““Renters don’t capture the wealth generated by house price appreciation, nor do they benefit from the equity gains generated by monthly mortgage payments . . .””

— Ksenia Potapov, Economist at First American

The Largest Part of Most Homeowner Net Worth Is Their Equity

Did you know that home equity is actually the biggest factor in building wealth for most households? It's even more important than anything else, according to data from First American and the Federal Reserve. And get this, it's true for households with various income levels!

So, you see that green part in each bar? That shows us how much of a homeowner's total wealth comes from their home equity. And you know what's cool? Regardless of how much you earn, owning a home can significantly increase your overall wealth. Nicole Bachaud, Senior Economist at Zillow, puts it this way:

““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.””

— Nicole Bachaud, Senior Economist at Zillow

If you're thinking about growing your wealth, you might want to take a look at the current real estate market. Right now, mortgage rates are pretty low, which means you might be able to afford more than you could a few months back. Plus, there's more houses coming onto the market, so you've got a wider range of options. Connecting with a local real estate agent can help you explore the opportunities available and steer you through the journey of finding your perfect home.

Bottom Line

If you're feeling unsure about whether to rent or buy a home, just remember that owning a home can actually boost your overall wealth in the long haul, regardless of your income. There are plenty of other benefits to homeownership too. Let's chat more about this – let's connect!