New York Times: Homeownership is Best Way To Build Wealth

The housing market has made a strong recovery, not only in sales and prices, but also in the confidence of consumers and experts as an investment. In a New York Times editorial entitled, Homeownership and Wealth Creation” they explain:

“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.”

Many of the points that were made in the article are on track with the research that the Federal Reserve has also conducted in their Survey of Consumer Finances.

The study found that the average net worth of a homeowner ($194,500) is 36x greater than that of a renter ($5,400).

The National Association of Realtors (NAR) expanded on the Federal Reserve’s research and projected that by the end of 2015, the average homeowner will have nearly 41x the net worth of a renter. Their findings are detailed in the graph below:

Increasing-Gap-STM

One reason for this large discrepancy in net worth is the concept of ‘forced savings’ created by having a mortgage payment and was explained by the Times:

“Homeownership requires potential buyers to save for a down payment, and forces them to continue to save by paying down a portion of the mortgage principal each month.”

“Even in instances where renters have excess cash, saving a substantial amount is difficult without a near-term goal, like a down payment. It is also difficult to systematically invest each month in stocks, bonds or other assets without being compelled to do so.” 

BOTTOM LINE 

“As a means to building wealth, there is no practical substitute for homeownership.” If you are a renter who is considering making a purchase, let's get together and discuss the benefits of signing a contract to purchase over renewing your lease!


51ccfebd 27dd 4d68 ab73 18ccfa276d5e bcf6c86d c645 4baf ba35 1ba427264300 b50c025c e95b 4817 9462 62116941c0c0 5d9223d8 6f67 45d2 b5d6 bdb0bc34b20b 64c1234f de3f 4675 9215 0d4fdf7cd029 816a3a73 5785 4a52 ac5e d6a66ffa40f6 dda632ae c281 4184 98e4 691db9e6e17c 5d5b8911 7fe5 429c 9234 687f2203014a 10fd0060 05bb 4c47 898d e54b5b63a75f 86e9c114 6e42 4300 bbff 574dbda9b5ba 81eaac01 2e74 430b 8d6c 653b65a21115 26aa5dab 535b 4bd2 b432 d88c9cce0241 62f0a6e4 a12e 48b0 96e9 e871299a1d76 11e2bf82 5a4e 4e95 9352 4350ddb967b4 7b158e8d b5a2 43d0 adac 8579274b125c 2679cf04 d2f5 4a7d 9136 06ecaa75c418 cff2c2e6 6e69 49dd ba73 3125b276fa37 b8f775ad d54e 47e2 8ffd ac954e2b32e3 98b4b101 8e3b 4fe7 a029 48f0a0a3a9f9 f1f29e4a ee47 4efa b563 e3ea9aa85585 b7b054b9 fb0c 48a1 a470 3f7466631000 c44503c1 93c0 405b a1de 893b909db7a2 5c778628 b79d 450b 9adc 552baff217a6