To Accumulate Wealth, Buy A House

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According to research from Harvard’s Joint Center for Housing Studies, homeownership – though not without risk – is an effective way to build individual wealth. And, because of this, homeowners typically have a higher net worth than renters. In fact, the median net worth of homeowners was $195,400 in 2013, which is $190,000 more than the median for people who rented. The study comes after many questions about the viability of homeownership as a financial investment were raised following the housing crash. After home values plummeted, the traditional view that owning a home would lead to greater wealth was damaged and, subsequently, the number of renters has increased as the homeownership rate has fallen. But homeowners are forced to save money in a way that renters aren’t – if only for the fact that paying off a mortgage requires owners to pay down a portion of their mortgage principal every month. This is essentially forced savings, which ultimately buys a greater percentage of ownership over time. In addition, homeowners can gain wealth through home price appreciation and have the added benefit of the tax benefits and deductions that come with ownership. Though the ups-and-downs of the housing market do pose a risk to homeowners, research continues to find a link between owning a home and accumulating wealth. More here.

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