5 Lessons I Learned In My First Year Of Homeownership - The Money Minimalists (2024)

FAQs

Why is homeownership important for wealth? ›

Homeownership promotes wealth building by acting as a forced savings mechanism and through home value appreciation. Wealth building hinges on the homeowners' ability to build home equity.

Compared to renters, homeowners report greater self-esteem, a higher quality of life and feeling more in control of their lives. Owning your home means stability. When you come home each night, you don't have to worry about noisy neighbors, surprise landlord visits or a monthly payment that raises each year.

If you pay off your mortgage you'll hold 100% equity in your home. You can pass this wealth down. This is called generational wealth, wealth that grows and helps support future generations.

A recent article from Realtor.com says: “Homeownership has long been tied to building wealth—and for good reason. Instead of throwing rent money out the window each month, owning a home allows you to build home equity. And over time, equity can turn your mortgage debt into a sizeable asset.”

What are the perks of homeownership over renting? When it comes to buying a home, there are numerous perks that come along with just the house itself; financial stability, financial strength, tax deductions, a permanent home, and a sense of belonging in your community.

2020 by the Federal Reserve, found the median U.S. household net worth is $121,700. However, the difference between the net worth of homeowners versus renters is staggering. In 2019, homeowners in the U.S. had a median net worth of $255,000, while renters had a net worth of just $6,300.

Home ownership in the United States has long been a cornerstone of the American dream. Not only does it signify independence and financial security, but this milestone also contributes to economic growth and job creation in communities.

Making Memories

Home is where lifelong memories are made. A house is simply a physical structure, but a home is a place where you create meaningful memories with loved ones. It is a place for watching first steps, celebrating birthdays, enjoying family dinners and celebrating old traditions while creating new ones.

Home ownership could also impact psychological health through social comparisons, by providing people with a sense of physical and emotional security, control over their life and safety (Elsinga et al., 2008), and social capital through increased participation in church and community organisations (Homenuck, 1973), ...

Key Takeaways

Generational wealth can provide long-term financial security and open up opportunities for your children and beyond. Strategies for building generational wealth include investing in education, financial markets, and real estate, and creating and preserving assets.

What influences household wealth? ›

In a structural or causal sense, net worth is a function of inheritance, past levels of disposable income, the propensity to save, and the return on investments.

The Federal Reserve reports the net worth of a homeowner is actually over 40 times greater than that of a renter. Maybe it's time to start thinking about buying a home, especially when they're so affordable in today's market. Every three years Consumer Finances shows how owning a home helps build financial security.

Most have paid off their mortgages. In 2020, 58% of the state's equity millionaires owned their homes free and clear.

The rule of thumb: A common rule of thumb for real estate allocation is to invest no more than 25% to 40% of your net worth in real estate, including your home. This range can provide you with the benefits of real estate ownership while giving you enough flexibility to pursue other investment opportunities.

Lower Housing Costs in Retirement

“Once a mortgage is fully paid, the homeowner incurs significantly lower housing expenses, providing a form of financial relief during the retirement years when income may be limited.”

In 2022, the median wealth gap between homeowners and renters reached almost $390,000, and the average wealth gap reached over $1,370,000. Over the past 33 years, the median wealth gap between homeowners and renters has increased by 70 percent, while the average wealth gap increased more than 250 percent.

Among U.S. homeowners overall – that is, households that own their primary residence – home equity accounted for a median of 45% of their net worth in 2021. (Half of U.S. homeowners derived more than 45% of their wealth from home equity alone, the other half derived less.)