LATEST NEWS

Stats Say Homeowners’ Net Worth is 45 Times Greater Than Renters’

If simple math is followed, home buying eventually makes a lot of sense.

By Archana Aithal Rose December 13, 2016

Talk to homeowners about the process of buying, and most of them liken the experience to a painful childbirth. It’s excruciating, it tests your patience—but once you do it, it’s the best thing that’s ever happened to you. When it comes to the debate of buying versus renting, I’m old school. You won’t need to convince me of the advantages of buying. When I was a child, my dad, a finance guy simplified it for me, “Imagine putting away chunks of money every month, now imagine it’s towards someone else’s home—that’s renting.” So, if you’re trying to convince me of the perks of buying, you’re preaching to the choir.

Looks like my father may have been right about this one. His financial beliefs align with the Survey of Consumer Finances conducted by the Federal Reserve. It reports that a homeowner’s net worth is estimated to be 45 times greater than that of a renter in 2016. Like, Hallelujah! The latest survey, which includes data from 2010-2013, says that the homeowner’s net worth was 36 times greater than that of a renter.

RelatedTop Five Retail Spaces To Rent In Washington Heights For Under $6,000

According to a Forbes article, “Based on what has happened since 2013 and projecting a conservative assumption of what could happen next year to home prices if we see only 3% price growth, the wealth gap between homeowners and renters will widen even further. The Fed is likely to show a figure of $225,000 to $230,000 in median net worth for homeowners in 2016, and around $5,000 for renters. That is, a typical homeowner will be ahead of a typical renter by a multiple of 45 on a lifetime financial achievement scale.”

It seems like buying and renting has much to do with the investor’s attitudes towards returns. A lot of investors are drawn toward making a quicker buck from pumping money in stocks and bonds. Milo M. Benningfield, a San Francisco-based financial planner, compares renting and buying to “Apple versus Google.” In a recent New York Times story, he said, “Somebody’s going to be right in terms of higher returns in the future, but we can’t know in advance who that will be—and it will be tough to quantify how much risk was taken along the way.”

RelatedIndian Real Estate Crashes As Prime Minister Outlaws Cash For Buying And Selling

However, if simple math is followed, home buying eventually makes a lot of sense. Conventionally, a lot of home buyers take out a 30-year fixed-rate mortgage to buy a home, which results in zero-mortgage after the 30-year period. The home price growth over that period would be the equity the homeowner would’ve amassed.

In an ideal world we would all be homeowners. Or at least, I would. Yours truly is on the 5th page of a 10-page application for renting an apartment in a co-op and 2 pages short of screaming, ‘Screw this, let’s buy.’ Buying also safeguards you from rising rents, while fixed mortgage prices stay constant. Investing in a home is also seen as a forced saving. Every time you pay the mortgage, you’re contributing to your net worth.

But one can’t simply gloss over the fact that buying a home is a huge lifetime commitment. And there are a lot of upfront costs that could dip into your savings. Especially in New York City, where homes are so expensive, no one can afford to put that much down. “And once you own, it’s all you. Renting is convenient when it comes to maintenance issues,” Adds Molly Williams, who just bought a townhouse in Riverdale after renting in the Village for nine years.

You’d think all these aspects would scare away young buyers? Not really. With all these hurdles, it may come as a surprise that Millennials are actually the ones in favor of buying. The Generation Y has made up the largest share of buyers in annual surveys conducted by the National Association of Realtors. Around 37% of buyers in 2015 were millennials with a median age of 30. If Forbes’ research is accurate, “80% believe that purchasing a home is a good financial decision.” That’s a reassuring number—especially since it drives a wise decision. Ultimately buying has everything to do with your own situation and subjective to your own needs. To be better-informed try rent or buy calculator that helps you decide what option suits you better. For now, it looks like the scale tilts in favor of buying by any objective standard.

Archana Aithal Rose

ABOUT THE AUTHOR Archana Aithal Rose

ABOUT THE AUTHOR Archana Aithal Rose

Archana Aithal Rose’s articles have appeared in The Times of India, CNNGo, Condé Nast Traveler and Vogue, covering such broad range of topics as fashion, art, travel, culture, celebrities, architecture and technology. In addition to writing, Archana's also known for her mad photography and cooking skills.

  • AGORAFY
    Avocado toasts are the reason why millennials can’t afford a home, says one Australian real estate developer. #AvocadoToast #Millennials https://goo.gl/TBCPnv
  • AGORAFY
    Five years on since Superstorm Sandy, Queens’ coastal peninsula is in the midst of a development boom. #Development #Rockaways https://goo.gl/BRKRrD
  • AGORAFY
    It turns out, renters can’t get enough of good ol’ no-doorman-no-frills apartments. Too bad developers aren’t building any. #Doorman #LuxuryRentals https://goo.gl/pdnbo6
The Housing Market In Shenzhen, The Silicon Valley of China, Slows In 2017
The city of Shenzhen has been on the real estate radar for quite some time. It is known as the Silicon Valley of China. Many…
Developers Jump Aboard The Trend To Revamp Transit Hubs And Remake Cities
Never has the often used marketing term, “close to transportation” been more important when attracting home buyers. These days it’s not just homes that are…
Millennials Are Fueling The Current Sizzling Real Estate Market
Ever wondered why the hosts of home improvement shows seem to be getting progressively younger, along with the fresh-faced couples getting their new properties made…
The Best Cities For Recent Grads To Rent – Without Blowing Their Entire Paycheck
What’s next post graduation? For most, the logical answer is to find a job. After the excitement of finishing your studies and the big celebration,…
Luxury Knows No Limit In Malaysia As A Deluge Of New Developments Hit The Market
The amount of newly constructed high-end real estate in Malaysia is almost as abundant as the lush vegetation which covers the tropical landscape. Despite vacant…
Don’t Call It A Commune – Upscale Co-Living Is Attracting Major Development
What may have once been referred to as a commune is today termed a co-living space. The big news that it’s not hippies with hemp…
It’s Official—New York Is Now The Most Expensive City In The World To Build
As if you didn’t already know, it’s expensive to build in New York City. Not just expensive but now officially the most expensive place in…
An Ultimate Destination For The Most Comprehensive Real Estate Data, Agorafy Prepares To Launch Nationwide
In the coming days, Agorafy will be entering a new chapter. It is the beginning of a new growth cycle in real estate technology with…

TOP 10