New Report Reveals: Homeowners Are Building Wealth While Renters Miss Out!

Owning a home has always been a strong way to build wealth, and new data from First American Data & Analytics highlights just how powerful it can be. 

First American’s Chief Economist explains that equity — the portion of the home’s value you own — is a wealth-building tool. Even homeowners who bought at the peak of the market in 2006 have built $169,000 in equity.

In contrast, renters during that same period missed out on a potential $229,000 in wealth.

First American’s Real House Price Index (RHPI) noted that home prices dropped by 3.1% between August and September 2024, showing a 9.2% decline compared to last year. However, house-buying power—which considers both income and mortgage rates—rose by 3.7% in September and 14.5% over the past year, reflecting improved purchasing power.

Affordability on the Rise, but Still Below Average

While affordability has gradually improved, it remains lower than the historical average. September marked the second month of year-over-year affordability gains, thanks in part to a 3.1% rise in household incomes and a slight decrease in mortgage rates.

Yet, national affordability remains 36% below pre-pandemic levels, suggesting it may still take time to reach the average.

Although home prices have hit record highs, the combination of lower mortgage rates and higher incomes has helped offset these increases, providing some relief to prospective buyers.

For anyone considering homeownership, these trends highlight the potential long-term wealth benefits that can outweigh initial costs.

Rent vs. Own

First American’s analysis also looked at the yearly costs of renting versus owning. For renters, this is simply their annual rent paid. For homeowners, the annual cost includes mortgage payments, taxes, insurance, and maintenance costs — assuming a 30-year, fixed-rate mortgage with a 5% down payment on a median-priced home.

The analysis weighs the cumulative wealth from owning against renting, showing that equity gains can help reduce the effective cost of homeownership. In some cases, these gains can even “pay” homeowners back over time, and deciding to buy is potentially even more rewarding.

Comparing cumulative wealth changes from 2006 to today, over 10 years from 2014 and since pre-pandemic 2019, it becomes clear how much homeownership can add to financial stability and long-term wealth.