The Dramatic Impact of Homeownership on Net Worth

One powerful insight could give you clarity and confidence when determining whether to rent or buy a Kansas City home this year.

The Federal Reserve releases the Survey of Consumer Finances (SCF) every three years to compare the net worth of homeowners and renters. The most recent report reveals the average homeowner’s net worth is almost forty times greater than that of a renter (see graph below):

When you’re a Kansas City homeowner, your equity grows as your home appreciates in value and you make your monthly mortgage payment. This equity growth is one of the reasons a wealth gap exists between renters and homeowners. For Kansas City homeowners, their monthly mortgage payment acts as a form of forced savings, eventually paying off when selling. KC renters never see a financial return on the money paid in rent every month. Ksenia Potapov, Economist at First American, explains it like this:

“Renters don’t capture the wealth generated by house price appreciation, nor do they benefit from the equity gains generated by monthly mortgage payments . . .”

The Largest Part of Most Kansas City Homeowner Net Worth

Home equity builds the average household’s wealth more than anything else. Data from First American and the Federal Reserve indicates this holds true across varying income levels (see graph below):

The green segment in each bar represents how much of a homeowner’s net worth comes from their home equity. As the graph shows, your income level doesn’t matter - owning a home can boost your wealth. Nicole Bachaud, Senior Economist at Zillow, shares:

“The biggest asset most people are ever going to own is a home. Homeownership is really that financial key that helps unlock stability and wealth preservation across generations.”

Are you ready to start building your net worth? The current Kansas City real estate market offers several opportunities worth consideration. Your purchasing power may be higher than in recent months, with Kansas City mortgage rates trending lower. Additionally, as more inventory comes to the KC housing market, interested buyers have more choices. A Just Say Home real estate agent will walk you through the opportunities available in the current market and guide you through finding your ideal home.

Bottom Line

Are you unsure whether to rent or buy a Kansas City home? No matter your income, owning a home can increase your overall wealth in the long run. The Just Say Home KC Team can help you learn more about this and the many other benefits of homeownership.

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