HOW DOHOMEOWNERSACCUMULATEWEAL TH? L a wr enc eY unf orFor bes Thedi f f er enc esbet we enbuy i nga ndr ent i nga r ema s s i v e.Ac c or di ngt ot heFeder a lRes er v e, at y pi c a lhome owner ’ snet wor t hwa s$195, 400, whi l et ha tofr ent er ’ swa s$5, 400.Theda t ar efle c t s2013a ndt hene xts ur v e yofhous ehol dfina nc es , whi c hi sc onduc t ede v er yt hr e ey ea r s , wi l lbeouti n2016.Ba s edonwha tha sha ppeneds i nc e2013a ndpr oj e c t i nga c ons er v a t i v ea s s umpt i onofwha tc oul dha ppenne xty ea rt ohomepr i c esi fwes e eonl y3% pr i c egr owt h, t hewea l t hga p bet we enhome owner sa ndr ent er swi l lwi dene v enf ur t her . TheFedi sl i k el yt os howafigur eof$225, 000t o$230, 000i n medi a nnetwor t hf orhome owner si n2016a nda r ound$5, 000f orr ent er s . Tha ti s , at y pi c a lhome ownerwi l lbea hea dof at y pi c a lr ent erbyamul t i pl eof45onal i f et i mefina nc i a la c hi e v ements c a l e. Thought her ewi l la l wa y sbedi s c us s i ona boutwhet hert obuyorr ent , orwhet hert hes t oc kma r k etof f er sabi ggerr et ur n t ha nr ea les t a t e, t her ea l i t yi st ha thome owner ss t ea di l ybui l dwea l t h.Thes i mpl es tma t hs houl dn’ tbeov er l ook ed. Av a s t ma j or i t yofhomebuy er st a k eouta30y ea rfix edr a t emor t ga get oma k eahomepur c ha s e. Af t er30y ea r s , t her ei sno mor t ga gepa y ment( norr entpa y ment ) . Sot hehomepr i c egr owt hov ert ha tt i meper i odwoul dbet hee qui t yt ha tt he homebuy erwoul dha v ea c c umul a t ed. Fore xa mpl e, t hemedi a nhomepr i c eofas i ngl ef a mi l ydwel l i ngi nt heU. S. t hi r t y y ea r sa goi n1985wa s$75, 500. Thi sy ea r , i twi l lbea tl ea s t$220, 000. Tha tfigur eof$220, 000i st hehous i ngc omponent oft heper s on’ swea l t h. Ev enha dhomepr i c esnotr i s en, t heper s onwoul ds t i l lha v e$75, 500i nwea l t ht oda y–ont opof notpa y i nga nyf ur t hermont hl ymor t ga gea f t er30y ea r s . Thi ss i mpl ee xa mpl edoesnotpl a youtnea r l ya snea t l yi nt her ea lwor l d, s i nc epe opl edonots t a yi noner es i denc eov er t he30y ea rper i od. Al mos ta l lhome owner st r a deup, c ha ngenei ghbor hoods , ormov et oabet t ers c hooldi s t r i c ta ts ome poi nt . Howe v er , t he ya r ea bl et oma k et hos er es i dent i a lr el oc a t i onsduet ot hehous i nge qui t ya c c umul a t ed, e v enov era s hor t erper i od, a ndc a ni mmedi a t el ya ppl yt ha te qui t yt ot hene xthomea sadownpa y ment . Ther ef or et hec ondi t i onsof s t ea di l ybui l di nghous i ngwea l t hs t i l lhol d. Wea l s ok nowt ha tnote v er y onec a nors houl dbehome owner s . Thememor i esofea s i l ya c c es s i bl es ubpr i memor t ga ges a nds ubs e quentha r s hf or e c l os ur epa i nsa r es t i l lf r es h, a ndr emi ndusoft hede v a s t a t i ngi mpa c tont hef a mi l i esi nv ol v ed, l oc a lc ommuni t i es , a ndt ot hebr oa de c onomy . I na ddi t i onmos ty ounga dul t sha v enotde v el opedt hefina nc i a ls t a ndi ng orha v ef oundas t a bl e, des i r a bl ec a r e era nd, t her ef or e, c hoos enotbehome owner sunt i ll a t er .Thehome owner s hi pr a t e a monghous ehol dsundert hea geof35i s35%c ur r ent l ya ndr a r el yr i s esa bov e40%hi s t or i c a l l y . Fort hos eundert hea ge of25, t hec ur r entowner s hi pr a t ei s23%a ndr a r el yr i s esa bov e25%. Butt het i mewi l le v ent ua l l yc omewhenpe opl ewa nt t oc onv er tt oowner s hi p.Byt het i mepe opl ea r ei nt hei rpr i meea r ni ngy ea r sof45t o55,nea r l yt hr e ef our t hsdo e v ent ua l l ybe c omehome owner s . Byr et i r ement , nea r l y80% a r ehome owner s . Ar e c ents ur v e yofc ons umer sc ommi s s i onedbymyor ga ni z a t i onr e v ea l edt ha t80% bel i e v et ha tpur c ha s i ngahomei sa goodfina nc i a lde c i s i on( 2015Na t i ona lHous i ngPul s eSur v e y ) . Mos tc ons umer sa ppea rt oa l r ea dyunder s t a ndt hes i mpl e ma t ha ndt hebenefit sofhome owner s hi p. Sodon’ tov er t hi nkt hema t t erofwhet hernowi sagoodt i met obuy , orwhet her s t oc kma r k etr et ur nswi l lbebet t er . Thee xa c tt i mi ngofahomepur c ha s ewi l lha v el i t t l efina nc i a li mpa c ti nt hebi g s c hemeoft hi ngs . J us tk nowt ha thome owner sgener a l l ydoc omeouta hea dofr ent er si nt hel ongr un.
La wr enc eYun, PhD. , Chi efEc onomi s ta ndSeni orVi c ePr es i dent L a wr enc eY uni sChi efEc onomi s ta ndSeni orVi c ePr es i dentofRes ea r c ha tNAR. Hedi r e c t sr es ea r c ha c t i v i t yf ort he a s s oc i a t i ona ndr e gul a r l ypr ov i desc omment a r yonr ea les t a t ema r k ett r endsf ori t s1mi l l i onREAL TOR®member s .
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