Owning versus renting: the wealth divide you can't ignore

Laura Johnson.

When comparing financial stability in the U.S., the difference between homeowners and renters is striking. Homeownership isn't just about having a place to call your own, it's a proven path to wealth. A look at the numbers reveals why this divide matters and what it could mean for your financial future.

The wealth gap between homeowners and renters has never been more pronounced. Today, the median net worth of a homeowner is $396,000, compared to a renter's $10,400. This is a staggering 38-fold difference. This disparity didn't happen overnight. Over the past 30 years, homeowners have seen their wealth grow by a median of $165,000, while renters have gained just $5,800 during the same period. Rising home values and the power of equity have propelled homeowners far ahead of their renting peers.2, 3

So, why does homeownership lead to such significant wealth creation? It largely boils down to equity and appreciation. A portion of every mortgage payment goes toward building ownership in an asset that typically increases in value over time. In fact, U.S. homeowners gained $1.1 trillion in equity in 2023 alone, thanks to rising home prices. Renters, on the other hand, pay for housing with no return on that investment, leaving them without the financial cushion that home equity provides.1, 2

The benefits of homeownership extend beyond the house itself. Homeowners tend to have more diversified financial portfolios, owning assets like stocks, retirement accounts and bonds at rates significantly higher than renters. This diversification not only builds wealth but also creates a safety net during economic downturns. By contrast, renters often spend a larger percentage of their income on housing, leaving little room to save or invest. Nearly half of all renters are classified as rent-burdened, spending over 30% of their income on housing costs – a financial strain that prevents long-term wealth accumulation.3

Debt is another key factor in this divide. While homeowners often carry significant mortgage debt, it's a type of debt that decreases over time as the property gains value. By retirement, many homeowners have paid off their mortgage entirely, freeing up additional financial resources. Renters, however, are more likely to carry high-interest consumer debt, such as credit card balances, which further limits their financial flexibility.2

Addressing this wealth gap requires systemic changes and individual action. Expanding affordable housing programs and increasing access to first-time homebuyer assistance could help more renters transition to ownership. Financial literacy programs focusing on saving and budgeting are also crucial to empower renters to take that first step toward homeownership.3

If you're a renter, it's worth exploring your options. Homeownership isn't just about having a roof over your head, it's about building a secure financial future. With creative financing solutions and guidance from experienced professionals, you could start building equity sooner than you think.

Ready to take that step? Let us help you navigate the path to homeownership and start building your wealth today. Contact Jeff LaMonte at (805) 794-0444 NMLS#1300679 or Laura Johnson at (661) 303-7853 NMLS#258087.

1 - Housing Wealth Gains for the Rising Middle-class Markets.

2 - What Are the Differences Between Home Owner and Renter Wealth?

3 - The Wealth Gap between Homeowners and Renters Has Reached a Historic High.

Laura Johnson has lived in Tehachapi for 49 years and her family's history in Tehachapi spans over 150 years. Laura has been in lending for 14 years and the real estate industry for 24 years. If you would like more information to see if a Cashout Refinance is right for you please reach out to Jeff Lamonte (805) 794-0444 or Laura Johnson (661) 303-7853.