Does it seem as though I'm repeating myself? That may be because some topics come up in the news with great frequency and are therefore worth revisiting. Homeownership as a means to building wealth is one of those topics.
Homeownership is one of the most common means for individuals and families to build wealth for their future. Every three years the Federal Reserve conducts a Survey of Consumer Finances in which they collect data across all economic and social groups. The latest survey, which includes data from 2010-2013, reports that a homeowner’s net worth for that time period was 36 times greater than that of a renter ($194,500 vs. $5,400).
In a recent Forbes article the National Association of Realtors’ (NAR) Chief Economist Lawrence Yun predicts that in 2016 the net worth gap will widen even further to 45 times greater. Not only will the gap widen due to the anticipated increase in real estate values, but it will widen because it is projected the money held in savings by renters will decline.
The graph below demonstrates the results of the last two Federal Reserve studies and Yun’s prediction:
Put Your Housing Costs to Work For You
Simply put, homeownership is a form of 'forced savings'. Every time you make a mortgage payment you are contributing to building equity in your home and to your personal net worth. Every time you pay your rent, you are contributing to your landlord’s net worth. Landlord's know that even when rents don't do more than cover their mortgage, taxes and insurance, they are building wealth by having YOU pay to build equity in their real estate holdings!
The latest National Housing Pulse Survey from the National Association of Realtors reveals that 80% of consumers believe that purchasing a home is a good financial decision. Yun comments:
“Though there will always be discussion about whether to buy or rent, or whether the stock market offers a bigger return than real estate, the reality is that homeowners steadily build wealth. The simplest math shouldn’t be overlooked.”
If you are interested in finding out if you could put your housing costs to work for you through homeownership, meet with a real estate professional in your area who can sit down with you and guide you through the process. And, as always, if I can answer any questions for you or provide more information, I am here to help!