THE PRIMARY DRIVER BEHIND THE HIGH NET WORTH OF HOMEOWNERS

Are you weighing your options to determine whether it makes more sense to rent or buy a home today? If so, have you considered this key data point that could enhance your confidence in your decision? 

Every three years, the Federal Reserve Board releases the Survey of Consumer Finances (SCF). That report covers the difference in net worth for both homeowners and renters. Spoiler alert: the gap between the two is significant.

The average homeowner’s net worth is almost 40X greater than a renter’s. And here’s the data to prove it!

In the latest report, the average net worth of homeowners has surged significantly, standing at around $255,000, while that of renters lingers at a mere $6,300. This year's release witnessed an even wider gap as homeowner net worth experienced a remarkable ascent, as stated in the Survey of Consumer Finances (SCF) report:

"The growth in median net worth from 2019 to 2022 is the most substantial three-year increase in the history of the modern SCF, surpassing the previous record by more than double."

A major catalyst for the rapid increase in homeowner net worth is the phenomenon of home equity. Over the past few years, often referred to as the 'unicorn' years in the real estate market, home prices have soared to unprecedented heights.

This surge was fueled by a limited supply of homes for sale and a significant influx of eager buyers seeking to capitalize on historically low mortgage rates.

The resulting supply-demand imbalance drove prices to new heights, leading to substantial equity gains for most homeowners during that period.

If you find yourself at a crossroads, deliberating between renting and buying, you might be wondering if you've missed the opportunity for a substantial increase in net worth. However, it's crucial to understand that, as a recent article in The Ascent points out:

"Regardless of whether your net worth has recently increased or not, there are strategies you can employ to enhance your financial standing in the coming years. ... Buying a home or an investment home can be a highly effective way to bolster your net worth, as property values tend to appreciate over time."

Historically, home prices have shown a consistent upward trajectory. Prices continue to rise in numerous regions due to a persistent shortage of housing compared to robust demand. Las Vegas continues to maintain steady growth. 

Consequently, expert forecasts for the next few years anticipate ongoing appreciation, albeit at a more typical pace for the Las Vegas housing market.  Those who choose to buy now will continue building equity in the years ahead.

Therefore, if you are financially prepared to purchase a home today, you are embarking on an investment that will contribute to the growth of your net worth in the long term.

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In the words of Jessica Lautz, Deputy Chief Economist at the National Association of Realtors (NAR):

"When deciding between renting and buying, it is essential to consider the overall cost of homeownership, including maintenance, utilities, commuting, and more, as well as the total financial benefit.

According to recent Federal Reserve data, the median net worth of homeowners stands at $396,200, compared to renters at just $10,400. There is no doubt about the wealth-building potential that homeownership offers."

In Conclusion

If you find yourself on the fence about whether to rent or buy a home, remember that homeownership can significantly boost your net worth over time.

If you would like to delve deeper into this topic or explore the numerous other advantages of owning a home, please don't hesitate to reach out.

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