With inflation rising nationwide, it is a great time to be a homeowner. Homeownership is also the foundation of achieving financial stability. For most people, putting a roof over one’s head is their most significant expense and is unavoidable; however, many people may not realize just how big of a difference owning a home contributes to your overall net worth over time. The National Association of Realtors released a study that found:
“Homeownership brings tremendous wealth gains. Total housing wealth rose $8.2 trillion from 2010 through 2020…”
Below we share a few specific reasons why homeownership is one of the best ways to achieve financial stability for decades to come.
Homeownership is a Key Facet of Financial Success
By diving into the study further and looking at the report by the National Association of REALTORS® Research Group, it details several homeownership trends and statistics. It also highlights the net worth of renters compared to homeowners. The study found that the average net worth for homeowners was $300,000, much larger than their renter counterparts at only $8,000.
To clarify that disparity, it means that the renter lost out on a potential 40 times gain in their wealth.
Numbers never lie, and this report demonstrates why owning a home is the critical piece of an effective plan to build your overall net worth.
The role of Equity Gains in Greatly Boosting a Homeowner’s Net Worth
While both renters and owners pay monthly housing expenses, homeowners grow their wealth directly due to equity. A homeowner’s equity can grow in multiple ways: one way is having your equity grow as your home appreciates in value, and the other is when you make your mortgage payments each month.
One of the main positives of being a homeowner is that your mortgage payment contributes to a forced savings account. When homeowners sell their homes, they will pay off the mortgage with the proceeds, and then the equity is returned to them as profit. As a renter, you will be guaranteed never to see any of your rent money every month.
The Takeaway
The numbers above show a vast discrepancy between a homeowner’s net worth and a renter’s. That alone shows you why becoming a homeowner is always a great idea. Please reach out if you are ready to start your journey to homeownership!