You might have heard some people say that renting a home right now is preferable to buying one. But there are still many compelling reasons to buy a home today. One of them is that owning a home is frequently considered to be a good long-term investment that contributes to the expansion of your net worth over time.
Regardless of income level, home ownership builds wealth
You might be shocked to learn that homeowners with a range of incomes have a much higher net worth than renters with the same income. This point is illustrated by data from First American (see graph below).
According to a recent article on Realtor.com, the following factors explain why homeowner wealth is so much higher:
“Homeownership has long been tied to building wealth—and for good reason. Instead of throwing rent money out the window each month, owning a home allows you to build home equity. And over time, equity can turn your mortgage debt into a sizeable asset.”
Basically, equity plays a big role in how much wealth home owners eventually accumulate. When you own a home, your equity grows as you pay off your loan and as the value of your home increases over time. In a recent podcast, First American’s Chief Economist Mark Fleming explains why renters don’t enjoy the same benefit:
“Renters as non-homeowners gain no wealth benefit as home prices rise. That wealth actually accrues to the landlord.”
Consider whether it would be better for you to buy a home rather than sign another rental agreement right now, before you decide to do so. Having a discussion with a real estate professional you trust will help you determine what makes sense for you. This expert can explain the advantages of owning so you can decide if that’s the best course of action for you.