Renting VS Buying The Ne Worth Gap You Need to See

The average homeowner’s net worth was about $255,000 in 2019 in the most recent update; the spread got even more significant as homeowner wealth grew even more (see graph below):

The 2019-2022 growth in median net worth was the most significant three-year increase over the history of the modern SCF, more than double the next-largest one on record.

One big reason why homeowner wealth shot up is home equity.

Equity is the difference between your home’s value and what you owe on your mortgage. You gain equity by paying down your mortgage and when your home’s value increases.

Over the past few years, home prices have gone up a lot. That’s because there weren’t enough homes for everyone who wanted one. This supply-demand imbalance pushed home prices up, translating into faster equity gains and even more net worth for homeowners.

If you’re still torn between renting or buying, here’s what you should know. While inventory has grown this year, there’s still insufficient in most places. That’s why expert forecasts show prices are expected to increase nationally again next year. It’ll just be at a more moderate pace.

While that’s not the sky-high appreciation we saw during the pandemic, it still means potential equity gains for you if you buy now. As Ksenia Potapov, Economist at First American, 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.”

But prices and inventory are going to vary by area. So, lean on a local real estate agent. They’ll be able to give you the local trends and speak to the other financial and lifestyle benefits of owning a home. That crucial information will help you decide the best move for you right now. As Bankrate explains:

“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 unsure whether to rent or buy, keep in mind that owning a home can grow your wealth over time if you can manage the numbers.