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Every three years, the Federal Reserve releases the Survey of Consumer Finances (SCF), which compares net worth for homeowners and renters. The latest report shows the average homeowner’s net worth is almost 40X greater than a renter’s
When you’re a homeowner, your equity grows 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, you’ll never see a financial return on the money you pay out in rent every month.
The Largest Part of Most Homeowner Net Worth Is Their Equity
Home equity does more to build the average household’s wealth than anything else. According to data from First American and the Federal Reserve, this holds true across different income levels.
If you’re ready to start building your net worth, the current real estate market offers several opportunities you should consider. For example, with mortgage rates trending lower lately, your purchasing power may be higher now than it has been in months.
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.
Beautiful home on the Maine seacoast
