Homeownership: The Key to Building Wealth

May 25, 2022

Given inflation's current four-decade high, the interconnectedness between financial security and homeownership is essential in today's economy. While the past few years have been anything but stable—physically, emotionally, and financially—homeownership is one of the most beneficial ways to increase financial security, contribute to one's net worth, and ultimately build wealth. Here are a few things to consider before bowing out of the current market or renewing your lease.

Laying the Foundation for Financial Success

A recent NAR report details several homeownership trends and statistics, including the difference in net worth between homeowners and renters. It finds:

". . . a homeowner's net worth was about $300,000, while a renter's was $8,000 in 2021."

In other words, the average homeowner's net worth is roughly 40 times that of a renter.

Equity Gains Can Significantly Boost a Homeowner's Net Worth

The net worth gap between owners and renters primarily exists because homeowners build equity. As a homeowner, your equity and net worth grow as your home appreciates in value and you make your mortgage payments each month. Additionally, in the current housing market, where supply is low and demand is high, homeowners' future resale value increases in tandem with rising home prices. In contrast, renters are solely building their landlord's equity and will never see a return on the money they have paid out for rent.