The link between financial security and homeownership is especially important today as inflation rises. But many people may not realize just how much owning a home contributes to your overall net worth. As Leslie Rouda Smith, President of the National 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 you’re looking to increase your financial stability, homeownership is a worthwhile goal.
Owning a Home Is a Building Block for Financial Success
“. . . the net worth of a homeowner was about $300,000 while that of a renter’s was $8,000 in 2021.”
To put that into perspective, the average homeowner’s 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 Homeowner’s Net Worth
The net worth gap between owners and renters exists in large part because homeowners build equity. As a homeowner, your equity grows as your home appreciates in 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 you’ve built up comes back to you. As a renter, you’ll never see a return on the money you pay out in rent every month.
To sum it up, NAR says it simply:
“Homeownership has always been an important way to build wealth.”
wealth building THROUGH HOME OWNERSHIP in nether providence TOWNSHIP
The power of homeownership in wealth building is illustrated in the below graph. It shows the annual median selling price of a single family house in Nether Providence Township. If a family bought the median priced house in 2016 for $349,000, that house would have increased in value to $522,900 by 2021. That comes to a gain of $173,900 or 50%. That money can now be made available in a Home Equity Line of Credit (HELOC) to use for a down payment on your dream house, pay college bills or whatever other financial need develops.
The gap between a homeowner’s net worth and a renter’s shows how truly foundational homeownership is to wealth-building. If you’re ready to start on your journey to homeownership, let’s connect today. Please give me a shout at 484-574-4088 or check me out at www.johnherreid. com and lets set up a time to talk or just get you the information you need to make the best decision for your situation.