93% of Americans Believe a Home Is a Better Investment Than Stocks
A recent Survey of Consumer Finances study released by the Federal Reserve reveals the net worth of homeowners is forty times greater than that of renters. If you’re wondering if homeownership is a good investment, the study clearly answers that question, and the answer is yes.
Do Americans believe a home is a better investment than stocks?
In a post on the Liberty Street Economics blog, the Federal Reserve Bank of New York notes that 93.3% of Americans believe buying a home is definitely or probably a better investment than buying stocks.
Here’s how the results break down:The survey also shows a wide range of reasons why Americans feel that way (respondents were able to pick more than one answer):
Bottom Line
The data show how strongly Americans believe in homeownership as an investment. That belief is warranted. The Liberty Street Economics blog put it best by saying:
“Housing represents the largest asset owned by most households and is a major means of wealth accumulation, particularly for the middle class.”
A Fannie Maesurvey recently revealed some of the most highly-rated benefits of homeownership, which continue to be key drivers in today’s power-packed housing market. Here are the top four financial benefits of owning a home according to consumer respondents:
88% – a better chance of saving for retirement
87% – the best investment plan
85% – the chance to be better off financially
85% – the chance to build up wealth
Additional financial advantages of homeownership included in the survey are having the best overall tax situation and being able to live within your budget.
Does homeownership actually give you a better chance to build wealth?
No one can question a person’s unique feelings about the importance of homeownership. However, it’s fair to ask if the numbers justify homeownership as a financial asset.
Last fall, the Federal Reserve released the Survey of Consumer Finances, a report done every three years, with the latest edition covering through 2019. Their findings confirmed that homeownership is a clear financial benefit. The survey found that homeownershave forty times higher net worth than renters ($255,000 for homeowners compared to $6,300 for renters).
The difference in net worth between homeowners and renters has continued to grow. Here’s a graph showing the results of the last four Fed surveys:The above graph only includes data through 2019, but according to CoreLogic, the equity held by homeowners grew by $26,300 over the last twelve months alone. That means the gap between the net worth of homeowners and renters has probably widened even further over the last year.
Some might argue the difference in net worth may be due to homeowners normally having larger incomes than renters and therefore the ability to save more money. However, a study by First American shows homeowners have greater net worth than renters regardless of their income level. Here are the findings:Others may think homeowners are older and that’s why they have a greater net worth. However, a Joint Center for Housing Studies ofHarvard Universityreport on homeowners and renters over the age of 65 reveals:
“The ability to build equity puts homeowners far ahead of renters in terms of household wealth…the median owner age 65 and over had home equity of $143,500 and net wealth of $319,200. By comparison, the net wealth of the same-age renter was just $6,700.”
Homeowners 65 and older have 47.6 times greater net worth than renters.
Bottom Line
The idea of homeownership as a direct way to build your net worth has met the test of time. Let’s connect if you’re ready to take steps toward becoming a homeowner.
