Homeownership vs. Renting: Build Wealth Through Real Estate

Hunter Letendre
Dec 5, 2024
2 min read

Updated: 7 days ago

Homeownership vs. Renting: Build Wealth with Real Estate

Why Does Buying a Home Build More Wealth Than Renting?

If you're debating whether to rent or buy, one factor stands out: the long-term financial advantage of building wealth through real estate. Homeownership creates opportunities to grow net worth—primarily through home equity and appreciation—while rent payments offer no return on investment.

Let’s explore why this wealth-building gap between owners and renters keeps widening.

Net worth gap between homeowners and renters has reached an historic high

How Much Greater Is the Net Worth of Homeowners?

According to the Federal Reserve’s Survey of Consumer Finances, the average homeowner’s net worth is nearly 40x higher than that of renters.

Homeowners’ Average Net Worth (latest data): $255,000+
Renters’ Average Net Worth: $6,300

This staggering difference comes down to one core principle: homeowners accumulate equity over time. Renters, on the other hand, pay monthly housing costs without gaining a financial stake in the property.

How Do Homeowners Build Equity Over Time?

The equity you build as a homeowner comes from two main sources:

Paying Down Your Mortgage: Every payment reduces your principal, growing your ownership share.
Appreciation in Home Value: As property values rise, so does your equity—even without additional payments.

Between 2019 and 2022, homeowners in many markets saw unprecedented equity gains, widening the wealth gap even further.

Is Now Still a Smart Time to Buy?

Despite higher mortgage rates and slower price growth, the real estate market still offers wealth-building potential:

Home values are still trending upward, though more moderately than during the pandemic boom.
According to First American economist Ksenia Potapov:“Homeownership remains an important driver of wealth accumulation and the largest source of total wealth among most households.”

Locking in a home purchase today could set you up to benefit from future appreciation—and start building equity now, not later.

What Other Benefits Does Homeownership Offer?

Beyond the dollars and cents, buying a home offers lifestyle and emotional perks that renting can’t match:

Stability and Belonging: Owning offers roots, stability, and a stake in your community.
Freedom to Personalize: Want to paint the walls or upgrade the kitchen? Go for it.
Long-Term Investment: Your mortgage payments contribute to your asset—not your landlord’s income.

While renting offers flexibility, buying often aligns better with long-term goals, especially if you're ready to settle down or invest in your future.

Should You Talk to a Real Estate Expert First?

Absolutely. Local markets vary dramatically, and buying might be more feasible than you think. A real estate agent can:

Help assess your financial readiness
Explain area-specific trends and inventory
Introduce loan options or first-time buyer programs

As Bankrate advises, “The rent vs. buy decision isn’t just about monthly costs—it’s about long-term wealth strategy.”

Bottom Line: Which Option Builds More Wealth?

If you're on the fence, consider this: renting is a cost, but homeownership is an investment. When you buy, you begin to build wealth through real estate—an asset that grows with you. Even if buying seems out of reach today, talk to a local expert about your options and the programs that can help.