The link between financial security and homeownership is especially important today asinflationrises. But many people may not realize just how much owning a home contributes to your overallnet worth. As Leslie Rouda Smith, President of theNational Association of Realtors(NAR),says:
Homeownership is rewarding in so many ways and can serve as a vital component in achieving financial stability.
Here are just a few reasons why, if youre looking to increase your financial stability, homeownership is a worthwhile goal.
Owning a Home Is a Building Block for Financial Success
A recent NARreportdetails several homeownership trends and statistics, including the difference in net worth between homeowners andrenters. It finds:
. . . the net worth of a homeowner was about$300,000 while that of a renters was $8,000 in 2021.
To put that into perspective, the average homeowners net worth is roughly 40 times that of a renter(see visual below):
The results from this report show that owning a home is a key piece to the puzzle when building your overall net worth.
Equity Gains Can Substantially Boost a Homeowners Net Worth
The net worth gap between owners and renters exists in large part because homeowners buildequity. As a homeowner, your equity grows as your homeappreciatesin value and you make your mortgage payments each month.
In other words, when you own your home, you have the benefit of your mortgage payment acting as a contribution to a forced savings account. And when you sell, any equity youve built up comes back to you.As arenter, youll never see a return on the money you pay out in rent every month.
To sum it up, NAR says itsimply:
Homeownership has always been an important way to build wealth.
Bottom Line
The gap between a homeowners net worth and a renters shows how truly foundational homeownership is to wealth-building. If youre ready to start on your journey to homeownership, connect with a Seven Gables advisor today.
