Owning your own home has long been part of the American dream. It's a goal most of us rightfully aspire to, and one that can often help build wealth. Indeed, 64% of Americans own a home today. If'
New York Times Homeownership Is Best Way To Build Wealth
Renee Plumlee, REALTOR®
Ivy League Realty
by The KCM Crew on December 15, 2014 in First Time Homebuyers, For Buyers
“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).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, sit with a local real estate professional who can explain the benefits of signing a contract to purchase over renewing your lease!
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