For the fourth year in a row, Americans have ranked real estate as the best long-term investment, according to Gallup. When you look at the net worth of homeowners versus renters - it’s easy to see why.  

Financial Security

Owning a home helps to build financial security because it is a type of forced savings. Every time you make a mortgage payment, you pay down your loan and increase the equity in your property. As a renter, you still make a payment every month, yet that payment isn’t building any wealth. 

In the Survey of Consumer Finances, the Federal Reserve shows just how much owning a home can increase wealth. The average net worth of those who own a home has grown considerably since 2010, while the average net worth of renters has remained flat. In addition, the gap between renters’ net worth and homeowners’ net worth continues to widen. 

The gap between renter and homeowner has become so large, that homeowners now have 40x greater net worth than renters do. 

Is now the right time to buy?

Knowing the gap in net worth is one thing, but there are several factors to consider when deciding to buy a home. 

1. Current Financial Situation. Consider other upfront costs like a down payment, closing costs, homeowners insurance, repairs, moving costs, and buying furniture. Do you have money saved up to pay for these expenses?

2. Timeline. Your intended length of stay has a significant impact on whether it makes sense to buy in the near future. The process of buying and selling a home involves a variety of different costs and factors. The longer you remain in a house, the more equity you will gain. If you plan on moving in one to two years, it may not be in your best interest to buy right now.

3. Local market and economy. Generally speaking, the best time to buy is during a buyer’s market. But, other factors may help to make purchasing a home more affordable. For example, with historic low mortgage rates in 2020, many people are saving on mortgage payments, even as home prices rise. 

To determine if now is the right time for you to buy, organize your financial information, and meet with a trusted mortgage lender and real estate agent to get insight on the interest rates and the local market.