From real estate agents to the United States government to most people’s grandmothers; everyone agrees that homeownership brings significant benefits. Owning a home is part of the American dream, a pillar of financial prosperity that brings financial stability and strength.
But is this belief reality, or is it a myth? Is it true that homeowners enjoy greater financial benefits? Do they really live better lives?
“Better life” is certainly a matter of opinion, and there are obvious benefits to renting. But there are numerous benefits to homeownership. These benefits, as studies show, go far beyond mere financial gains.
5 Real, Data-Driven Benefits of Homeownership
1. Greater Net Worth
When you rent a home, you are paying for the privilege to live in that property. You make payments to your landlord, who gets to keep every penny. Of course, there are costs to owning a property (taxes, maintenance, etc.) but it’s generally believed (although not entirely true) that you are wasting money when renting.
With a mortgage, a large chunk of your monthly payment goes to paying off the balance on the loan. You steadily gain ownership (known as “equity”) on a high-value asset, resulting in better longterm personal net worth.
This is not a theory; numerous studies have found that the average net worth of a homeowner is far greater than that of a renter. A study from the Federal Reserve found that homeowners have an average net worth of $254,900, while renters have an average net worth of only $6,270. If these numbers are true, the net worth of the average homeowner is over 40 times greater than the net worth of a renter!
2. Purchasing an Appreciating Asset
When you are a homeowner, a large portion of your net worth will be the total value of your home. For example, if you have $50,000 in savings and own a home worth $250,000, your net worth is $300,000. (This assumes no mortgage and other debts that would reduce net worth and does not take into account the value of vehicles, retirement accounts, and other assets.)
Your overall net worth will be highly connected to your home’s value, which is almost guaranteed to go up.
DQYDJ (“Don’t Quit Your Day Job”) is a financing and investing website that focuses on financial statistics and information. Their report on home values shows a steady increase since 1954, the earliest available data. According to their research, the median home value in February of 1953 was $18,080. In June of 2022, the median was $388,718.
But this is not a fair comparison. $18,000 in 1953 was far more than it is now. We could dissect these numbers in any number of ways, but the overall point is the same. If you park your money in a property, you are likely to see the value of that property grow. This is, we can assume, a large reason why homeowners typically have higher net worth than renters, and it’s one of the main benefits of homeownership.
3. Better Health: An Actual Benefit of Homeownership?
Let us be clear about this point: we are not, in any way, saying that you should purchase a home to improve your health. We are saying, however, that studies have demonstrated people who own their homes tend to live healthier lives. Of course there are healthy people who rent and unhealthy people who own, but studies have shown, in general, that homeowners tend to be healthier.
Habitat for Humanity released a report on the impacts of homeownership. This report noted a variety of data points but also referenced a moment in 2007 when a Boston University medical professional testified to congress. She stated that owning a home “literally prevents disease.”
Another report from Keeping Current Matters notes that “homeowners have a significant health advantage over renters.” They noted that homeowners are 2.5 times more likely to have good health. In fact, when adjusted for other factors (demographics, housing-related characteristics, etc.) studies have found that homeowners are over three times more likely to enjoy better health.
4. Greater Civic Engagement
Keeping Current Matters, a real-estate education website, has compiled information finding “homeowners were found to be more politically active than renters” and generally participated more in their communities.
77% of homeowners have voted in local elections compared to 52% of renters. Renters appear also to have a stronger sense of the political process: 38% of homeowners knew the name of their local representative on the school board, while only 20% of renters could name their representatives. Homeowners also have higher participation in social groups like voluntary organizations and churches.
5. Better Environment for Children
Renters and homeowners. Low-, middle-, and high-income earners. Doctors and high school dropouts. We all want what’s best for our kids. Studies have shown that children of people who own their homes generally have better cognitive and behavioral outcomes.
A study from researchers at Ohio State and Purdue University brings light to this subject. The review of data found that owning a home leads to a “higher quality home environment” than renting. For children living in homes that are owned by their parents or guardians, both math and reading achievements were higher. Behavioral problems also tended to be lower among children living in “owned homes.” Researchers concluded by noting that better math and reading, as well as reduced behavioral issues, will lead to “higher educational attainment, greater future earnings, and a reduced tendency to engage in deviant behaviors.”
Side Note: Correlation vs Causation?
All of these studies are interesting, but there is an issue: the difference between causation and correlation. As any researcher can tell you, just because two things happen at the same time (correlation) does not automatically mean one causes the other (causation).
For example, studies show that homeowners are more active in their communities and the local political process. However, it seems unlikely that simply owning a home causes participation. Perhaps people who are inclined to own a home are also more inclined to participate in the local community. This is important to remember, as (once again) we are not saying that owning a home will automatically make you richer, healthier, and more engaged in the community.
The stats can be scrutinized however you like, but there appear to be significant benefits to homeownership; benefits that go far beyond the dollars.
The Benefits of Homeownership are Waiting for You!
If you want to enjoy the benefits of homeownership, contact our team and let’s complete your mortgage application today!