Home is not only where your heart is, but also where your wealth is.
Homeownership is an effective way to build wealth, especially for low-income households. According to the 2019 Survey of Consumer Finances, a triennial survey that collects detailed accounts of households’ finances, the median homeowner has 40 times the household wealth of a renter – $254,900 for the homeowner compared to $6,270 for the renter.
Homeowners are wealthier than renters at every income level, and the majority of homeowner wealth comes from housing for every income category except for the very top earners.
In fact, First American is so firm in its belief that homeownership plays an integral part in building wealth. According to Odeta Kushi, deputy chief economist for First American Financial Corporation, the majority of households that transition into homeownership, reinforces that housing is one of the biggest positive drivers of wealth creation based on recent studies.
Economists have long studied homeownership’s links to wealth and claims that owning a home is especially beneficial in wealth-building in regards to low-income housing.
For Most, The Largest Asset is Housing.
The lower the income of a home-owning household, the greater the share of its wealth coming from homeownership. This pattern has remained consistent over the last three decades, according to the historical Survey of Consumer Finances data.
In this view, the composition of wealth differs from each household. The fluctuations in home prices will have a much bigger impact on the wealth of lower-income families than of those that have a mix of other assets. Despite the constantly changing housing market, numerous studies have shown that homeownership leads to greater wealth accumulation when compared with renting.
However, results of the survey do not reveal any direct cause and effect. In light of this, when studying the variance between the wealth of renters and homeowners by income, it further strengthens the proof of the impressive wealth-building power that comes with homeownership.
