Building Wealth through Homeownership: Insights from Real Estate Consultant

Sumedha Shukla
February 4, 2023

Homeownership remains a key factor in wealth building, making it a focal point for real estate consultants like myself. The connection between homeownership and wealth accumulation is robust. It’s not just about having a place to live; it’s about leveraging real estate as a valuable asset to enhance your financial well-being. 

The statistics speak for themselves. The 2019 survey of Consumer Finances revealts that the median homeowner possesses 40 times the wealth of a renter. (2019 is the most recent survey as 2010-2022 is still in the works) This stark contrast underscores the importance of homeownership in wealth creation. Regardless of income level, homeowners consistently have greater wealth than renters. Howing plays a significant role in this disparity, with the majority of homeowner wealth tied to their residential properties. For example, even among the lowest-income group, homeowner households have a median net worth of $102,500, while renters only have $1,500. Residential property represents a staggering 92 percent of total homeowner net worth in this income category. 

Housing wealth has been a primary driver of net worth growth, between 2016 and 2019. It accounted for 32 percent of the overall increase in net worth across all income groups. In fact the value fo housing wealth increased by $21,000 for households at the bottom of the income distribution, surpassing the combined gains from other asset types.

When it comes to asset composition, housing plays a crucial role for most homeowners. Over the past three decades, homeownership has consistently represented a significant portion of total assets. In 2019, the lowest-income households, on average, attributed nearly 75 percent of their total assets to housing. Even middle-income households allocated between 50 and 65 percent of their assets to housing. While the highest-income households had a lower percentage of 34. 

It’s important to acknowledge the potential risks associated with homeownership and the regional variations in its benefits. However, numerous studies consistently demonstrate that homeownership leads to greater wealth accumulation compared to renting. Homeowners have ethe advantage of benefiting from house price appreciation and equity gains resulting from mortgage payments, which effectively act as a form of forced savings. 

As a real estate consultant, I recognize the need for careful consideration of market dynamics and individual circumstances. However, this data reinforces the fact that homeownership remains one of the most effective avenues of wealth creation for the majority of households. By strategically engaging in real estate, you position yourself to tap into significant financial opportunities and lay the foundation for long-term wealth growth. 

* Information pulled from www.federalreserve.gov