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Home Owners have 46 times higher Net Worth than renters

By Ted Mackel

Real Estate Agent with Keller Williams Realty Simi Valley 01224852

February 13, 2009 11:04 AM

I have seen the number closer to 36 times, but at either level this is a compelling reason to consider home ownership. The median net worth for homeowners is $184,400; for renters, it’s $4,000 says the Survey of Consumer Finances, 2004, Federal Reserve Board of Governors. Table 3, “Family Net Worth.”

I am sure the naysayers and provacateurs will come out of the woodwork claiming that the market is down from 2004....they are right, current pricing is closer to the 2003 market so the net worth numbers are still very high and still a compelling reason to own a home.

The fact is that equity is not the only factor that raises the net worth, but there is an attitude toward money that changes with home ownership vs the detached life style of a renter.

Again as I awalys post. This is a great time to make a smart buy, tempered with patients and not emotion.

See http://www.homebuysblog.com

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Anonymous

Really?

You can't really compare apples to apples since there is a whole skew of age (how many people between 18 and 30 own a home relative to 35-70.. especially in Ventura County) and income. The richer you are the more likely it is you can buy a home, it isn't that the home made them wealthy, they have wealth from other areas and buy a home. I've seen this stat bandied about so much by agents and I always thought it was rather dumb. They act like the home did it or something. 1/3 of homes have no mortgage and that skews that stat even wider. You start looking at the people with mortgage vs renters and things get a bit more iffy (you have to dig into the stats instead of looking at the survey for that). A home isn't really wealth it is just scheduled savings which barely keeps up with inflation (though not lately). Unless you plan on staying in the home a very long time or buy especially low owning is a relatively expensive proposition in So Cal. Other parts of the country it isn't.

I'd put my wealth from renting & saving the past 5 years against any So Cal homeowner buying in the last 5 years, I bet I come out pretty well.

p.s. There is also a newer survey than the 2004 (It was for the year ending in 2007), the current net worth for owners is 234.2 and for renters 5.1 . Homeowners rejoice! lol

Feb 14, 2009 04:02 PM

Ted Mackel

Keller Williams Realty Simi Valley - Simi Valley, CA

Simi Valley Real Estate Agent

Really?,

When I was 23 I came to Simi Valley. My father directed me to a local broker to ask about a rental. That broker said to me "Ted, you're not going to rent, that is throwing your money away. I have a foreclosure I just got from Great Western Bank you need to see". Well I bought that condo with a Neg Am 11% loan and kept that condo for 8 years. The market went up and then it crashed in the early 1990s. When I sold that condo I made a decent profit in a very terrible market and bought a Fannie Mae foreclosure. I got a 9% 30 year fixed loan and thought I died and went to heaven to have financing below 10%. In 2007 I kept that home as a rental and bought a second home in Simi Valley as my family needed more space. The best decision of my financial life and quality of life for may family was to buy that first condo that I could not afford. A condo that I had to rent the other bedroom out to swing the payment and HOA fees.

I will suggest two books for you to read. Millionaire Next Door & The Automatic Millionaire. You will definite have a new appreciation for net worth and the term "rich".

I am a dollar cost averager and a closet contrarian. 5 year plays are myopic for my taste. I have never looked at real estate as a microwave, I have always seen it as a crock-pot. Meals taste better from a crock pot. I house is a place to live and raise a family, when you treat it like a high yielding short term investment you create the mess we are in now. California is not a "cash flow now" investment property area. If you need "cash flow now" then look outside CA.

Drop me an email sometime. I plan to pick up another rental in the next couple of years, you could rent it, put your money in savings and I'll take your rent and pay off the mortgage...it will be a win-win for both of us.

Feb 18, 2009 07:12 AM

Dave

What is the median net worth of Mercedes drivers?

What is the median net worth of Corolla drivers?

Is trading my Corolla in for a Mercedes the path to increased wealth?

Mar 06, 2010 06:26 PM

Dave, Thanks for the comments those are the questions that will baffle science for all time. ;)

Mar 07, 2010 03:01 AM

Home Owners have 46 times higher Net Worth than renters

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