Thursday, January 23, 2025 / by Maria Sims
Building Wealth Through Real Estate: Homeownership vs. Renting in 2025
Real estate is a cornerstone of wealth in the U.S., and the divide between homeowners and renters highlights its impact. Let’s explore household equity and how it shapes financial security. I was reviewing some graphics created by Dr. Lawrence Yun, the Chief Economist for the National Association of Realtors, who shared his insights on the current and future state of the housing market. I can tell you that the message was crystal clear—homeownership is more important than ever when it comes to building wealth!
The Incredible Growth of Home Equity
The first graph showed the dramatic increase in equity that homeowners in the U.S. have built over the past several years. For those who may not be familiar, equity is the portion of your home’s value that you actually own. It’s the difference between what your home is worth and how much you owe on it. Over the past few years, the U.S. housing market has seen home values rise at a substantial rate. As a result, homeowners have been able to build significant equity—sometimes in the hundreds of thousands of dollars! If you bought a home five or ten years ago, chances are you’ve seen your home’s value increase substantially, which means your equity has grown as well. This isn’t just a small, incremental increase either. We're talking about a huge amount of equity. Imagine having a home that’s worth $300,000 today when you bought it for $200,000 just a few years ago. That $100,000 increase is the kind of growth we’re seeing in many areas across the country. And for homeowners, this growth means a stronger financial position, with the potential to use that equity for future investments, upgrades, or even retirement savings.
The Surprising Value of Real Estate as an Investment
The second graph showed the value of real estate not just as a place to live, but as a powerful investment opportunity. This graph demonstrated the long-term benefits of owning a home compared to renting. Over time, the value of homeownership continues to grow, while rent payments remain stagnant or even increase without contributing to personal wealth. When you rent, your monthly payment only covers the cost of living in the space, but it doesn’t contribute to your future financial health. In contrast, when you buy a home, your monthly payments are building equity and increasing the value of your investment. The graph showed how real estate has outpaced many other forms of investment, like stocks or bonds, especially over extended periods. For example, the average homeowner can expect their property value to increase over time, with an additional benefit: inflation protection. While inflation drives up the cost of living, property values typically rise as well, making your home a solid hedge against rising costs.
The Bottom Line: Real Wealth is Built with Property
So, what does this mean for you? If you’re looking to build real wealth, owning property is one of the most effective ways to do it. Buying a home isn’t just about having a place to live—it’s an investment in your future. Whether you're a first-time buyer or someone looking to upgrade or downsize, real estate has proven to be a stable, long-term investment. Sure, it can be intimidating to think about purchasing a home, especially if you’re unsure about where to start or how to afford it. But I’m here to tell you that it’s possible. There are programs and financial strategies out there that can help make homeownership more attainable than you might think.
If you're feeling uncertain about whether homeownership is within your reach, it is worth a conversation. If you’re ready to take the next step and explore how homeownership can build your wealth, don’t hesitate to reach out. Real estate is an investment that pays off for years to come, and with the right support, you can make it happen.