If you’re trying to decide whether to rent or buy a home this year, here’s a powerful insight from an article on Keeping Current Matters that could give you the clarity and confidence you need to make your decision.
"Every three years, the Federal Reserve releases the Survey of Consumer Finances (SCF), which compares net worth for homeowners and renters. The latest report shows the average homeowner’s net worth is almost 40 times greater than a renter’s. This is a message I am continuously telling my friends who rent - buying a home is the best way to accumulate wealth for the average person. It is an even better way to pass on wealth to your children.
One reason a wealth gap exists between renters and homeowners is because when you’re a homeowner, your equity grows as your home appreciates in value and you make your mortgage payment each month. When you own a home, your monthly mortgage payment acts like a form of forced savings, which eventually pays off when you decide to sell. As a renter, you’ll never see a financial return on the money you pay out in rent every month. Ksenia Potapov, Economist at First American, explains it like this:
“Renters don’t capture the wealth generated by house price appreciation, nor do they benefit from the equity gains generated by monthly mortgage payments . . .”
The Largest Part of Most Homeowner Net Worth Is Their Equity
Home equity does more to build the average household’s wealth than anything else." Hopefully the above graphic explains it in terms that make sense. Why not invest in property? You have to live somewhere. Why build someone else's wealth by paying them rent?
