Why It's Important to Build Wealth with Homeownership

Homeownership is the largest source of wealth among American families, so if wealth is your goal, homeownership is an investment tool that you should seriously consider.¹

A study by the National Association of Realtors® concluded that the wealth of the average U.S. homeowner is 40 times higher than that of the average American renter. In fact, homeowners have seen their homes appreciate by an average of 68% since 2012, according to data released in 2023.²

If you’re aiming to join the homeownership ranks, we’re here to help. Newrez has great loan products for first-time homebuyers, buyers with tight finances, less-than-perfect credit and more.

How Homeownership Can Build Wealth

Here are several compelling reasons why homeownership is a powerful tool for building wealth and financial stability:

• Equity Growth: With each mortgage payment, you build equity in your home, which can be leveraged for future financial needs, such as home improvements, education, or even starting a business.
• Appreciation Over Time: Historically, real estate tends to appreciate in value over time, which may significantly increase your net worth.
• Stable Housing Costs: Unlike renting, which can involve regular rent increases, a fixed-rate mortgage provides stability in your housing costs over the long term.
• Personal Control: As a homeowner, you have the freedom to make changes and improvements to your home, which can further enhance its value and your quality of life.
• Community and Stability: Homeownership often fosters a deeper sense of community involvement and stability, which can contribute to overall well-being.

Buying a Home vs. Renting

At first glance renting may seem cheaper than owning a home, particularly when you consider homeowning expenses like insurance, property taxes and maintenance. Be sure to carefully consider your own circumstances as well as the housing market, local property taxes and how much repair the home needs before signing on the dotted line.

Buying a Home

• Pro: Builds equity over time, offering a potential return on investment.
• Con: In some cases, a significant upfront investment may be necessary, including maintenance, property taxes, and insurance.

Renting a Home

• Pro: Offers flexibility and lower upfront costs, making it easier to move or adjust living situations.
• Con: Does not build equity, meaning monthly payments do not contribute to long-term financial growth. Building rules and rental rates can change drastically.

Things to Remember

How can you make sure that you’re approaching home buying the right way and maximizing your chances of building wealth? Keep a couple things in mind:

• Understand that your home is not a liquid investment. Keep an emergency fund and other savings in case of unexpected situations. Don’t put all of your eggs in one basket!
• The housing market is cyclical and experiences downturns. While downturns are temporary, no one can precisely predict when they will end, which can be a problem if you need to sell your home in the midst of one. The best way to avoid this is to buy a home for a great price and plan to hold onto it for years while you build equity.

If you’re ready to become a homeowner, make sure you’ve got excellent mortgage professionals in your corner. Newrez loan experts can help you find a mortgage that suits your situation, so you can be on your way in your wealth-building journey.

National Association of Realtors® is a registered trademark of the National Association of Realtors and is not affiliated with Newrez LLC.

References:

1 Single-family Homeowners Typically Accumulated $225,000 in Housing Wealth Over 10 Years (nar.realtor)

2 Study: Homeowner Wealth Is 40 Times Higher Than Renters (nar.realtor)