Lawrence Yun is our guru to national market data at the National Association of Realtors (NAR). At Pinnacle Residential Properties, we have had the opportunity to hear him speak here in the Wellesley area and at the annual meeting of the NAR annual conference.

Yun reports that according to the Federal Reserve, data from a 2013 study states that a typical homeowner’s net worth was $195,400, while that of renter’s was $5,400. A typical homeowner will be ahead of a typical renter by a multiple of 45 on a lifetime financial achievement scale.

“Though there will always be discussion about whether to buy or rent, or whether the stock market offers a bigger return than real estate, the reality is that homeowners steadily build wealth. The simplest math shouldn’t be overlooked. A vast majority of homebuyers take out a 30-year fixed rate mortgage to make a home purchase. After 30 years, there is no mortgage payment (nor rent payment). So the home price growth over that time period would be the equity that the homebuyer would have accumulated. For example, the median home price of a single-family dwelling in the U.S. thirty years ago in 1985 was $75,500. This year, it will be at least $220,000. That figure of $220,000 is the housing component of the person’s wealth. Even had home prices not risen, the person would still have $75,500 in wealth today – on top of not paying any further monthly mortgage after 30 years.”

It is important to remember that not everyone can or should be homeowners. The memories of easily accessible subprime mortgages and subsequent harsh foreclosure pains are still fresh, and remind us of the devastating impact on the families involved, local communities, and to the broad economy. In addition, many Millennials are in a more transient stage of life and might want to be more flexible in terms of location either for a career, more schooling or a relationship.

In 2015, NAR conducted a survey of consumers and found that 80% of those questioned believe that purchasing a home is a good financial decision. Right now in our area, rents are soaring and interest rates on mortgages are quite low, which contributes to a “buy” versus “rent” environment. (Of course, there is still that pesky 10-20% down payment that Millennials need to save for!)

For the full article by Lawrence Yun, click here.