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Real Estate

Homeowner Personal Net Worth is 45 Times Greater Than a Renter’s

There are numerous ways to strengthen your personal finances. You might pay off debt, develop a plan for building an emergency fund or resolve to make smarter decisions with your money. These strategies can put you on the right path financially and contribute to a higher net worth, but you shouldn't stop here. 

Even if you're not comfortable dabbling in the stock market or getting involved with other types of investments, homeownership is one investment you should consider—especially if you're looking to increase your personal net worth.

In a Forbes article, the National Association of Realtors’ Chief Economist Lawrence Yun predicted that by the end of 2016 the average homeowner would have a personal net worth 45 times greater than the average net worth of renters. The Federal Reserve conducts a Survey of Consumer Finances every three years, and its latest report corroborates Yun’s prediction.

In 2013, the average homeowner had a net worth just over $190,000. Renters in the same year only had a net worth of $5,400. Forecasters predicted that homeowners would increase their net worth to over $220,000 by 2016, with renter net worths decreasing to $5,000. 

It’s likely no surprise that homeowners on average maintain greater net worth than renters. A home purchase is an investment that often pays off in the long run. The main difference between homeownership and renting is that homeowners earn equity. Each mortgage payment eats at the amount owed to their mortgage lenders. Paying down the mortgage balance coupled with appreciating property values builds equity. The more equity a homeowner has, the greater his net worth. 

Regardless of how much a renter pays monthly for a house or apartment, rent payments do not build equity for the renter. It does, however, increase the landlord’s personal net worth.

“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,” explained Yun. 

Bottom Line

Are you ready to buy a home and start growing your net worth? We’re more than happy to sit down and discuss your mortgage options. Getting a mortgage is easier than you think, especially once you learn about mortgage resources available to you.