A recent survey from LendingTree.com has revealed that many Americans favor home ownership over renting.
In fact, 88% of Americans would rather own a home than rent one.
In general, purchasing a home is regarded as a good investment compared to renting because you build equity—the difference between what you owe on the home and its appreciated market value. If you’re spending money each month on a place to live, why not make that money build equity for yourself, rather than building equity for someone else?
The bottom line is: homeowners have a greater net worth than renters. The Federal Reserve’s Survey of Consumer Finances found that homeowners have 44.5 times more net worth than renters.
According to CoreLogic:
- The average homeowner gained $51,500 in equity over the past year.
- There was a 29.3% increase in national homeowner equity year over year.
In fact, CoreLogic’s Chief Economist, Dr. Frank Nothaft explains, “Home equity wealth is at a record level and will bolster economic activity in the coming year. Higher wealth spurs additional consumer expenditures and also supports room additions and other investments in homes, adding to overall economic activity.”
Top Reasons to Own Rather Than Rent – Financial
- Renters are susceptible to increasing rents, which historically, are raised each year.
- Mortgages can be fixed, which provides a stable payment that won’t fluctuate over the life of your loan.
- When you sell your home, any profit can't be taxed (with some limitations).
- Owning a home also comes with other tax benefits, such as deductions on mortgage interest, mortgage discount points, mortgage insurance, and property taxes.
Top Reasons to Own Rather Than Rent – Lifestyle
- Want to paint your living room red? When you own, you can! Homeowners love having the flexibility to make a space their own, without having to abide by lease terms.
- You move when you want without having to adhere to annual lease terms.
Fido is always welcome! There are typically no pet restrictions or limitations.
Typically, in a single family home, you don’t have neighbors above or below you. (Exclusions on condos/townhomes with shared walls.)
Home Appreciation
The best thing about equity is that it grows without you even thinking about it, especially in a sellers’ market. Homeowners who purchased a typical single-family home 30 years ago at the median sales price of $103,333 with a 10% down payment loan and who sold the property at the median sales price of $357,700 in 2021 Q2 accumulated housing wealth of $349,258—or a 73% return on investment.
Mark Fleming, Chief Economist at First American, notes that a home is the only asset that’s both an investment and also serves as your shelter. “The major financial advantage of homeownership is the accumulation of equity in the form of house price appreciation. . . . We won’t always have 17% house price appreciation, but we have to take into account the fact that the shelter that you’re owning is an equity-generating or wealth-generating asset.”
Sources: Keeping Current Matters, Federal Reserve’s Survey of Consumer Finances & CoreLogic