The case for real estate ownership is still compelling even though there are some choppy waters across the country. Every three years, the Federal Reserve publishes their Survey of Consumer Finances (SCF). The new SCF won’t be published until September of this year, but let’s look back at 2019.
In 2019, the SCF showed that homeowners had a typical net worth of $255,000 versus $6,300 for renters. With the massive jump in real estate values over the last 3 years, we can expect the disparity to be even greater when the new data is published.
For almost a decade, rising prices have been a given in most markets. The National Association of Realtors (NAR) reported that November marked 129 consecutive months of price increases year over year, the longest streak on record.
Thanks to equity increases and low interest rates, home owners have reaped the benefits to enhance their net worth during that decade plus, mostly thanks to little risk for lenders and mortgage insurance companies.
If we take the home value appreciation of the last 3 years and call it a 25% gain in value, that means the SCF could reflect typical net worth of $318,750 while renters would only go up to $7,875.
Bottom Line:
If you are waiting for interest rates to go lower to buy a home, you are costing yourself thousands of dollars. It is better to buy a home you can afford and live there for a couple of years, then sell and buy up, rather than just renting for 2-3 more years and trying to save for a bigger home.