Should You Rent or Buy a Home This Year? Here’s What You Need to Know

If you’re trying to decide whether to rent or buy a home this year, here’s a powerful insight that could provide the clarity and confidence you need to make your decision.

Every three years, the Federal Reserve releases the Survey of Consumer Finances (SCF), which compares the net worth of homeowners and renters. The latest report reveals a striking difference: the average homeowner’s net worth is nearly 40 times greater than a renter's. (see #1) ➡️

This wealth gap exists partly because homeowners build equity as their homes appreciate in value and make monthly mortgage payments. Essentially, each mortgage payment acts as a form of forced savings, eventually paying off when you decide to sell. In contrast, renters never see a financial return on the money they pay in rent. As Ksenia Potapov, an Economist at First American, explains:

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

Home Equity: The Cornerstone of Wealth Building

Home equity is one of the most significant contributors to the average homeowner’s wealth. Data from First American and the Federal Reserve shows this holds true across different income levels. (see #2) ➡️

The green segment in each bar represents how much of a homeowner's net worth is derived from home equity. This data shows that owning a home can substantially boost your wealth regardless of income level. Nicole Bachaud, Senior Economist at Zillow, emphasizes this point:

“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 you’re ready to start building your net worth, the current real estate market offers several opportunities you should consider. For instance, with lower mortgage rates, your purchasing power might be higher now than in months. Additionally, with more inventory coming onto the market, you have more options. A local real estate agent can guide you through the available opportunities and help you find your ideal home.

Conclusion:

If you’re uncertain about whether to rent or buy a home, remember that homeownership can significantly increase your overall wealth in the long run, regardless of your income level. To learn more about this and the many other benefits of homeownership, let’s connect.

If you have any questions or need more information, please don't hesitate to contact us. We're here to help you every step of the way!

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Michael Thayer