Your net worth is the value of your assets after subtracting everything that you owe. It's a really good way to measure your wealth. To calculate it, add up the value of everything you own (your house, cars, personal property, investments, and more) and then subtract all your debts (mortgages, car loans, credit card debt, and all other obligations).
When you look at data on net worth, homeowners have a much higher net worth than renters do. That means that, even after taking their mortgage into account, they have much more wealth than people who rent.
But just how much higher is the net worth of homeowners? Here's what you need to know.
The net worth of homeowners vs. renters will shock you
According to the Federal Reserve, homeowners had a median net worth of $396,200 in 2022 and a mean net worth of $1,530,900 (which obviously has been driven up by some very wealthy people).
Renters, on the other hand, have a median net worth of just $10,400 and a mean net worth of $154,900. This is a very small fraction of the wealth that homeowners have. But as big as this gap is, it actually represents an improvement. Between 2019 and 2022, the median and mean net worth of renters grew by 43% and 40% respectively, while homeowners only saw their median and mean net worth grow by 34% and 20%.
Renters may have seen their fortunes improve during this time in part because of pandemic-related stimulus funds. These would have had a greater impact on their overall wealth than on those who had more money to start with.
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Why do homeowners have such a higher net worth?
Homeowners, as a group, are undoubtedly much wealthier than renters, and to a shocking degree. And there are a few reasons for that.
The most obvious reason has to do with the fact that you need to have pretty stable personal finances in order to be able to buy a house in the first place. In other words, people who are already doing pretty well -- and who are on track to building wealth -- are more likely to take out a mortgage and buy a home. People who are struggling and who have very few assets are more likely to be renters, since they can't afford a down payment or qualify for a home loan.
So, it is not necessarily that a home makes people wealthier, but instead that wealthier people are more likely to be in a position to buy a home.
The reality, though, is that owning a home usually does make it a whole lot easier to build wealth. That's because:
- Each housing payment helps the homeowner acquire a valuable asset, which they eventually own free and clear. So each payment grows their net worth a bit, which is not the case when someone is paying rent.
- Homes often go up in value. A homeowner could add tens of thousands, or even millions of dollars, to their net worth as the home they are living in increases in value.
This does not mean you must buy a home to grow rich -- although it can help, especially if you aren't that disciplined about saving and investing. You will, of course, need to make sure you're in a good financial position to buy though (with housing costs taking up no more than about 30% of your income) or you could risk foreclosure or being unable to do other things important to getting rich, like investing for your future.
If you decide not to buy a home, though, you'll need to make sure you are using plenty of your money to purchase other assets (such as stocks) that can help your wealth grow over time. You won't have the forced saving and property appreciation a homeowner gets, so if you want to be rich, you'll need to be much more intentional about finding another way to make it happen.
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FAQs
Homeowners have a much higher net worth than renters do -- the median for a homeowner in 2022 was $396,200, versus just $10,400 for renters. Owning a home is one reason why that's the case, as a home is a valuable asset. People who are in a better financial position are also more likely to be able to buy a home.
What is the percent of homeowners vs renters in the US? ›
The United States homeownership rate represents the percentage of occupied housing units where the resident is also the owner. A constantly evolving figure, the United States homeownership rate currently rests at 65.2%, while renter-occupied housing units make up 34.8% of the national stock.
Do homeowners have a net worth that is more than 40 times greater than their renter counterparts? ›
The Impact of Homeownership on Net Worth
According to a report published by the Joint Center for Housing Studies of Harvard University in 2021, the median homeowner had 40 times the household wealth of a renter in 2019. The median homeowner had a net worth of $255,000, compared to just $6,300 for renters.
Are home owners rich? ›
After several years of soaring house prices, U.S. homeowners are sitting on a record mountain of wealth. Why it matters: The economy looks pretty great for Americans who own their own homes — that's nearly 66% of the population!
How much of wealth is in a home? ›
In conclusion, shoot for your primary residence value to equal no more than 30% of your net worth by age 45. If you do, you will find a great balance. In finance, there are few things better than enjoying your home in a stress-free manner while it also appreciates in value.
Are homeowners wealthier than renters? ›
Homeowners have a much higher net worth than renters do -- the median for a homeowner in 2022 was $396,200, versus just $10,400 for renters. Owning a home is one reason why that's the case, as a home is a valuable asset. People who are in a better financial position are also more likely to be able to buy a home.
What percent of US is homeowners? ›
The homeownership rate in the U.S. as of the first quarter of 2023 is 66%. The number of U. S. households increased by just 10.1 million from 2010 to 2020, fewer than in any other decade between 1950 and 2010.
Does homeownership build wealth? ›
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.”
How much of net worth should be in housing? ›
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.
What do renters value most? ›
The two most significant factors renters cite when looking for a rental are price and location. Most people say they are moving to save money (37 percent) or to be closer to work (32 percent).
Even the ultra-wealthy don't want to deal with homeownership costs. The number of millionaire renters has soared over the last five years, according to a recent report by Beauchamp Estates.
Why does renting not build wealth? ›
You're essentially just paying someone else to live in their home. There's no ownership involved, no equity-building, and you're essentially paying for their mortgage and other costs. Of course, this doesn't mean that renting can't help you build wealth. It just means that it works in a different way.
Do most millionaires pay off their mortgage? ›
In fact, the average millionaire pays off their house in just 10.2 years.
What percentage of Americans are living paycheck to paycheck? ›
How Many Americans Are Living Paycheck to Paycheck? A 2023 survey conducted by Payroll.org highlighted that 78% of Americans live paycheck to paycheck, a 6% increase from the previous year. In other words, more than three-quarters of Americans struggle to save or invest after paying for their monthly expenses.
What is considered rich for a household? ›
According to IRS standards, a monthly income of approximately $45,000 qualifies someone as wealthy. However, if you're aiming for the top 1% as measured by the Economic Policy Institute (EPI), you'd need to earn about $68,277 monthly.
What is the average savings of a renter? ›
The most recent snapshot of American households shows that the median renter household has virtually no cash savings. According to Harvard's Joint Center for Housing Studies, renters have median cash savings of $630 and the median renter net worth, including all assets, is just $5,100.
What percentage of people own rental properties in the US? ›
Most rental properties are owned by individuals, but only a small share of individuals own rental property, according to IRS income-tax data. In 2018, 6.7% of individual tax filers (about 10.3 million) reported owning rental properties. Those filers reported owning 1.72 properties on average.
What percent of Americans live in houses vs. apartments? ›
While 80 percent of the population would prefer to live in a single-family home, seven in ten Americans (70 percent) actually do. Apartment and condo living is only preferred by 8 percent of the population, yet two in 10 Americans (17 percent) live in an apartment or condo.
What percentage of Americans have renters insurance? ›
55 percent of U.S. renters, or 61 million people, currently have renter's insurance policies. It's often not their choice, as 75% of covered renters are covered because of a requirement by their landlord.
What state has the highest percentage of renters? ›
California was the state with the highest share of renter households in the United States in 2022. About 30 percent of the households lived in rental accommodation in that year. Renting was even more common in the District of Colombia, where about 39 percent of households were renters.
