Homeowners have 40 times the household wealth than renters. Another astonishing statistic is that households have 68% of their wealth in their primary residence! Leveraging the philosophical cliché “Time is money” is not only good advice it is smart.
Homeowners have 40 times the household wealth than of renters. Another astonishing statistic is that households have 68% of their wealth in their primary residence! Leveraging the philosophical cliché “Time is money” is not only good advice it is smart.
Homeownership is an effective way to build wealth. And more importantly, it is a critical step for low-income households to participate in homeownership, because it’s one of the easiest ways for low-income households to build wealth over time.
Those Americans that do own a home have 68% of their wealth tied up in their primary residence. Keep in mind though that some homes are valued at $75,000 and some homes are valued at $75 million dollars. So temper this information with the correct calibration.
Research has shown that a homeowner that has equity on average has a net worth of about $254,000 as opposed to a renter who has $6200. Also, research has demonstrated that homeowners are wealthier than renters at every income level and the majority of this wealth comes from the primary residence. The exception to this research is the very top income earners. For example, in the lowest income group, if you own a home, your household net worth is about $102,000 as compared to your peer, who is a renter, who only have $1,500 of net worth.
The research surfaced interesting patterns.
- 35% of families do not have a residential wealth
- The next group of families that reported not having any residential wealth emphasized more of a lifestyle philosophy and their wealth was tied up in cars boats and recreational vehicles which accounted for 43% of their wealth and checking savings money markets and IRA which accounted for 25% of their wealth.
- The third group are families that owned homes and their medium income was about $71,000 per year as opposed to their peers that did not own a home their annual income was $31,000 per year
- Age also played a role in residential wealth. Which ties into the philosophy of time is money the median age of those with residential wealth was 58 years old. As opposed to those without residential wealth, had an age of 41.
- Education is the next variable. Those with a four-year college degree accounted for 40% of all residential wealth. Those with some college accounted for 25% of residential wealth 35% of the residential wealth was developed by high school diploma families or no education at all.The situation was reversed for households with no residential wealth. Only 22% had at least a college degree, 27% had some college and just over 50% had a high-school diploma or less.
Despite the risk of volatility in the housing market, numerous studies have demonstrated that homeownership leads to greater wealth accumulation when compared with renting. Renters don’t capture the wealth generated by house price appreciation, nor do they benefit from the equity gains generated by monthly mortgage payments, which become a form of forced savings for homeowners.
There are certain risks from homeownership, and its benefits are not uniform across all markets. However, for the majority of households that transition into homeownership, the research data reinforces that housing is one of the biggest positive drivers of wealth creation.
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