November Housing Market Update

With the holiday season rapidly approaching, we’d be remiss if we didn’t take the opportunity to wish you a Happy Thanksgiving! As we venture into the holiday season, we hope you, your family, and your loved ones are well.

Here at 5 Elements Real Estate Advisors, we are excited to launch into the fall housing market. Read on for featured properties and insight into the benefits of growing your net worth as a homeowner.

Renting vs. Buying: The Net Worth Gap You Need to See

Every three years, the Federal Reserve Board shares a report called the Survey of Consumer Finances (SCF). It shows how much wealth homeowners and renters have – and the difference is significant.

On average, a homeowner’s net worth is nearly 40 times higher than a renter’s. Check out the graph below to see the difference for yourself:

Why Homeowner Wealth Is So High

In 2022, the average homeowner’s net worth was about $396,200, while the average renter’s was just $10,400. That’s a big gap. But in the most recent update, the spread got even bigger—thanks primarily to the growth in homeowner wealth (see graph above).

As the SCF report says:

“. . . the 2019-2022 growth in median net worth was the largest three-year increase over the history of the modern SCF, more than double the next-largest one on record.”

One big reason why homeowner wealth shot up is home equity.

Equity is the difference between your home’s value and what you owe on your mortgage. You gain equity by paying down your mortgage and when your home’s value goes up.

Over the past few years, home prices have gone up a lot. That’s because there weren’t enough available homes for all the people who wanted one. This supply-demand imbalance pushed home prices up – and that translated into equity gains and even more net worth for homeowners.

Additionally, nearly 60% of mortgages have interest rates below 4%. Due to this, homeowners most likely want to keep the property by renting it out versus selling, unless there is a major life event. Therefore, buyers have to rent for a little longer before they can make their financial strength stronger and compete with other buyers’ offers in a multiple-offer situation, which has been very common for some popular neighborhoods and price ranges.

If you’re still torn between renting or buying, here’s what you should know. While inventory has grown this year, in most places, there’s still not enough to go around. That’s why expert forecasts show prices are expected to go up again next year nationally. It’ll just be at a more moderate pace.

If you’re not sure if you invest in a property (whether to live in or rent out), keep in mind that if you can make the numbers work, owning a home can grow your wealth over time. One final thing to note is that rents are expected to accelerate in the next 2-3 years, and, financial advisors always recommend that you diversify your available cash investments.

And if homeownership or landlord-ownership feels out of reach, feel free to schedule an appointment with me. It’s never too early or too late to consult with a professional realtor.

Reach out for a free, no-obligation consult at 703.677.0709  / [email protected].