The Best Way to Build Wealth? Own a Home Says ‘The New York Times’
Recently, The New York Times published an interesting editorial about homeownership and building wealth. Homeownership and Wealth Creation delves into the real estate housing market and how people who own a home have a significantly higher average net worth than those who rent.
Because the housing market was in decline in recent years, renting has become increasingly popular. The question becomes, is homeownership worth it? And is renting a better option? The article from The New York Times clearly states that homeownership is absolutely worth it and far outweighs renting for many reasons. Although the real estate housing market has made a strong recovery in recent years in both sales and prices, the most exciting news is that both consumer and economic experts agree that owning a home is the best investment and the greatest way to build your wealth.
“Homeownership long has been central to Americans’ ability to amass wealth; even with the substantial decline in wealth after the housing bust, the net worth of homeowners over time has significantly outpaced that of renters, who tend as a group to accumulate little if any wealth.”
A recent study done by the Federal Reserve found that the average net worth of a homeowner is 36 times more than that of a renter! So, a renter who’s net worth is $5,400 pales into comparison to a homeowner who’s net worth would be $194,500. This discrepancy is due in large part to something called “forced savings.”
According to The New York Times, here is how homeowners amass their wealth compared to renters:
In order to buy a home, potential buyers must first save for that down payment. This forces them to continue to save by paying a part of the mortgage principal month after month. Renters, on the other hand, can only build wealth by investing “an amount equal to a down payment plus savings from renting.” Saving for renters is hard because if they do have any excess cash, they are not likely to put that money away. If there is no long-term goal, such as a down payment, it is nearly impossible to save each month. Also, renters are much less likely to invest in stocks and bonds if they are not forced to do so.
Here are some other reasons to own a home:
-Across the United States, mortgage interest rates would have to rise to 10.6% for renting to become less expensive than buying a home. Rates have not been that high since 1989!
-Low mortgage rates have kept homeownership from becoming more expensive than renting, despite home prices increasing in many real estate markets over the past year.
-Some housing markets may see renting next year increase as prices continue to go up faster than rents and if mortgage rates rise, due to a strengthening economy.
Renting oftentimes is a choice you have to make because of restraints on your income. But if you are looking to build for your future and increase your wealth, there is no better way to do that than homeownership. If you are a renter who is thinking about buying a home, it is a good idea to find a qualified and experienced real estate agent in your area who can explain the benefits of purchasing a home rather than signing another lease.
Thinking of buying or selling a home in the La Jolla area? As consistent Top Producers in real estate, Linda Daniels and The Daniels Group are your La Jolla housing specialists. Working with The Daniels Group will give you with the advantage of having local experts to ensure that you have a successful real estate transaction. From buying, selling and investing to financing options and more, we have the expertise and resources to help you achieve your goals. Call us today at (858) 361-5561 or email us anytime by clicking here.