And as home values rise, so does your equity when you’re a homeowner. That’s the difference between what your home is worth and what you owe. So, with every mortgage payment, that equity grows. Over time, that becomes part of your net worth. That’s why the Federal Reserve shows the typical homeowner’s net worth is 40X greater than the typical renters. It’s one of the reasons why Forbes says: “While renting might seem like [the] less stressful option . . . owning a home is still a cornerstone of the American dream and a proven strategy for building long-term wealth.”
The Biggest Downside of Renting
So, short-term, why does renting feel like a simpler choice? Lower monthly payments, less responsibility, no strings attached. But long-term? It can sting. For decades, while home prices have been rising, rent has gone up too. And while rent has held rather steady more recently, history shows the overall trend is up and to the right. That makes saving for a home more complicated than ever (see graph below):
Increase in Rents Since 1988
Median Asking Rent, Vacant for Rent Units in U.S., Quarterly
$1,000 $1,100 $1,200 $1,300 $1,400 $1,500
$0 $100 $200 $300 $400 $500 $600 $700 $800 $900
Source: Census
Rent doesn’t build wealth. It doesn’t come back to you later. It pays your landlord’s mortgage – not yours. So, whether you rent or own, you’re paying a mortgage. The question is: whose mortgage do you want to pay? 4
Bottom Line Renting may feel more do-able today. But over time, it could cost you more – without helping you build anything for your future. The first step toward getting out of the rental trap is to set a plan. Let’s connect, so you’re ready when the time is right for you.
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