A recent study from the Survey of Consumer Financing revealed that the net worth of a homeowner is over 44 times greater than that of a renter.
I know I sound redundant when I bring up the topic of buying versus renting, but I am going to mention it again. Everyone should realize that unless you are living somewhere rent-free, you are paying a mortgage – either yours or your landlord’s. Buying your own home provides you with a form of ‘forced savings’ that allows you to use your monthly housing costs to increase your family’s wealth.
In other words, every month that you pay your mortgage, you are paying off a portion of the debt that you took on to purchase your home. Therefore, you own a little bit more of your home every month in the form of home equity. As your home’s value increases you also gain home equity.
The Financing study also revealed that the median net worth of a homeowner is $231,400 – a 15% increase since 2013. At the same time, the median net worth of renters decreased by 5% ($5,200 today compared to $5,500 in 2013).
That is why Gallup reported that Americans picked real estate as the best long-term investment for the fifth year in a row. According to this year’s results, 34% of Americans chose real estate. Stocks followed at 26%, and then gold, savings accounts/CDs, or bonds.
I know what some of you may be thinking, not everyone has the ability to buy and there is a myriad of reasons why it may not make sense for some. And I agree. My general rule of thumb is, if you have the down payment for the property you want to buy and you plan to live there for at least 3 years it probably makes sense. Here is a great online calculator to help you figure things out.
Reach out to me to discuss your specific situation.