Should You Rent or Buy? Here’s How Homeownership Impacts Wealth
Deciding whether to rent or buy a home? A major factor to consider is how much homeownership can boost your net worth.
Every three years, the Federal Reserve Board releases the Survey of Consumer Finances (SCF), a report comparing the wealth of homeowners and renters. The findings consistently highlight a significant gap between the two groups.
The Wealth Gap: Homeowners vs. Renters
On average, homeowners enjoy a net worth nearly 40 times greater than renters. For instance, in a previous SCF report, the average homeowner’s net worth was approximately $255,000, compared to just $6,300 for the average renter. Recent updates reveal that this gap has widened even further as homeowner wealth continues to grow.
Why Homeowner Wealth Keeps Rising
The most recent SCF report notes:
“. . . the 2019-2022 growth in median net worth was the largest three-year increase over the history of the modern SCF, more than double the next-largest one on record.”
A key driver behind this growth is home equity, which represents the difference between a home's value and the remaining mortgage balance. Home equity grows as homeowners pay down their mortgages and as home prices increase.
In recent years, home prices have surged due to a shortage of available homes for sale. This imbalance between supply and demand drove prices higher, leading to substantial equity gains and greater net worth for homeowners.
Renting vs. Buying: What You Need to Know
If you’re torn between renting and buying, consider this: while housing inventory has increased slightly, many markets still face shortages. Experts predict that home prices will continue rising next year, albeit at a more moderate pace.
Even though the rapid price increases of the pandemic era have cooled, buying a home now could still yield equity gains over time. As First American economist Ksenia Potapov explains:
“Despite the risk of volatility in the housing market, homeownership remains an important driver of wealth accumulation and the largest source of total wealth among most households.”
However, housing market conditions vary by location. A local real estate agent can provide insights into market trends and help you evaluate the financial and lifestyle benefits of homeownership. As Bankrate notes:
“Deciding between renting and buying a home isn’t just about cost — the decision also involves long-term financial strategies and personal circumstances. If you’re on the fence about which is right for you, it may be helpful to speak with a local real estate agent who knows your market well. An experienced agent can help you weigh your options and make a more informed decision.”
Bottom Line
If you’re debating whether to rent or buy, remember that homeownership can significantly grow your wealth over time. And if buying feels out of reach, let’s connect to explore programs that could make owning a home possible for you.
