Are you torn between renting and buying a home in today’s market? Let’s shed some light on a crucial piece of information that might tilt the scales in favor of your decision, especially if we’re going to take Homeowner Net Worth in San Diego into consideration. Every three years or so, an insightful report emerges from the Federal Reserve Board – the Survey of Consumer Finances (SCF). This study highlights the net worth disparities between homeowners and renters. And trust us when we say this, the difference is more than just noticeable.
Homeowners, on average, boast a net worth that’s nearly 40 times greater than that of renters. But don’t just take our word for it; the data speaks for itself (check out the graph below):
Exploring the Surge in Homeowner Net Worth
A recent update has brought some eye-opening facts to light about the financial landscape for homeowners versus renters. Previously, it was reported that the average homeowner’s net worth hovered around $255,000, while renters averaged around $6,300. However, the latest data reveals a significant shift. This year’s release shows an even more pronounced divide, with homeowner net worth experiencing a substantial increase. Insights from the Survey of Consumer Finances (SCF) highlight this remarkable change.
“. . . 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.
The remarkable surge in homeowner net worth is largely attributed to the substantial growth in home equity.
The past few years have been extraordinary in the real estate world, often referred to as the ‘unicorn years.’ During this period, we witnessed housing prices soar to unprecedented heights. This surge was driven by a unique market scenario – a limited supply of homes for sale coupled with a surge of eager buyers motivated by historically low mortgage rates. This created a classic supply-demand imbalance, propelling home prices upwards. Consequently, homeowners who were fortunate enough to own property during this era experienced a significant increase in their home equity.
Now, if you’re currently weighing the options between buying and renting, you might be wondering if the opportunity for this kind of net worth growth has passed you by. However, it’s important to consider the broader picture. As highlighted in a recent article from The Ascent:
“Whether your net worth increased in recent years or not, there are steps you can take to boost that number in the coming years. . . buying a home can be a great way to grow your net worth, since home values have a tendency to rise over time.”
A key driver behind the impressive surge in homeowner net worth is the growth in home equity. Over the years, it’s been observed that home prices generally trend upwards. Even in today’s climate, with mortgage rates hovering around 7-8%, we’re still seeing prices inch up in numerous regions. This is largely due to the ongoing imbalance between supply and demand. Experts in the field anticipate that this trend of home appreciation will continue, albeit at a more standard rate that aligns with historical norms of the real estate market.
This doesn’t imply a dramatic spike like we’ve seen in recent years, but it does suggest a steady increase in equity for those who choose to invest in a home now. For those who are in a position to purchase, this represents a strategic opportunity to bolster your financial future. Jessica Lautz, the Deputy Chief Economist at the National Association of Realtors (NAR), offers valuable insights on this topic.
“. . . when deciding to rent vs buy, one must calculate the total cost of homeownership (maintenance, utilities, commuting, etc.) and the total financial benefit. Based on new Fed data . . . the median net worth of homeowners was $396,200 vs renters at $10,400. There is no question about the wealth gains that homeownership provides.”
In Conclusion
Navigating the decision between renting and buying can be a challenging decision to consider. However, it’s also important to consider the significant impact homeownership can have on your financial well-being in the long run. Over the years, owning a home has proven to be a powerful contributor to increasing personal net worth. Interested in exploring this further, along with the numerous other advantages of owning your own home? The McT Real Estate Group is here to help. Let’s have a conversation and dive into the details.