As inflation rises and the cost of living continues to increase, many people are feeling the squeeze in their budgets. While it might seem tempting to rent and wait for the market to calm down, there’s a compelling reason why now could be the perfect time to buy a home: building wealth through homeownership.
A recent report highlights a powerful statistic: by 2024, the median net worth of homeowners is expected to be 42 times greater than that of renters. This wealth gap has been growing steadily over the past few years, even as the market has seen fluctuations. Let’s explore why homeownership remains one of the most reliable strategies for building financial security and why it’s a strong hedge against inflation.
1. Homeownership Builds Equity Over Time
When you rent, you’re paying for the privilege of living in someone else’s property. Your rent checks go toward their mortgage, helping them build wealth—not you. When you own a home, every mortgage payment you make contributes to your own equity. Equity is the portion of your home that you truly own, and it grows as you pay down your mortgage or as your home’s value increases.
According to data from the Federal Reserve and the National Association of Realtors (NAR), the median homeowner’s net worth has consistently risen, reaching $396,200 in 2022. In comparison, renters saw minimal gains, with their net worth hovering around $10,400. The difference is staggering, highlighting the long-term financial benefits of owning a home versus renting.
2. A Hedge Against Inflation
In times of inflation, homeownership serves as a powerful hedge. When prices go up, the value of tangible assets like real estate typically increases as well. This means your home not only holds its value but can appreciate over time, protecting your purchasing power. Meanwhile, rent prices tend to rise alongside inflation, making renting a less predictable and more costly choice.
By locking in a fixed-rate mortgage, homeowners can stabilize their housing costs and avoid the uncertainty of rising rents. While mortgage interest rates may fluctuate, they are often offset by the long-term appreciation of the property.
3. Long-Term Financial Security
Investing in real estate is a proven method for building wealth. In fact, for many Americans, the equity in their home represents a significant portion of their net worth. The chart below illustrates the growing gap between homeowners and renters over time:
•In 2019, homeowners had a median net worth of $295,500, compared to just $7,300 for renters—a 40x difference.
•By 2022, this gap narrowed slightly but remained substantial, with homeowners at $396,200 versus renters at $10,400—a 38x difference.
•The 2024 estimate shows homeowners reaching a net worth of $415,000, while renters are expected to remain around $10,000, widening the gap again to 42x.
This data, sourced from the Federal Reserve’s Survey of Consumer Finances and the National Association of Realtors (NAR), tells a clear story: Even during periods of economic uncertainty, homeowners continue to build wealth at a far greater rate than renters.
4. The Real Cost of Waiting
If you’re holding off on buying a home because of interest rates, consider this: Renting offers no return on your investment. Each month’s rent payment is money you’ll never get back. On the other hand, owning a home allows you to build equity and benefit from property appreciation over time.
While it’s true that rates may be higher now than in recent years, waiting for the “perfect” market conditions could mean missing out on years of potential wealth building. Historically, real estate values have risen, and the financial benefits of owning a home far outweigh the costs of renting long-term.
Ready to Explore Your Homeownership Options?
If you’re ready to take the first step toward building lasting financial security, we’re here to help. Our team can guide you through the process, answer your questions, and help you find the best options for your budget and financial goals. Contact us today to get started.
