NAHB Eye On Housing – Examining Differences between Homeowner and Renter Wealth
With the end of 2024 approaching, NAHB’s Eye on Housing is reviewing the posts that attracted the most readers over the last year. In March, Jing Fu compared homeowners and renters’ major assets, debt and net worth, as well as differences between age groups.
As examined in a previous post, homeownership plays an integral role in a household’s accumulation of wealth. This article further discusses the role of homeownership and examines the difference between homeowner and renter household balance sheets across assets, debt, and net worth.
Households who own a primary residence (homeowners) build primary residence equity, while renters have zero residence equity. In the third quarter of 2023, CoreLogic’s homeowner report analysis detailed that U.S. homeowners with mortgages have seen their equity increase by a total of $1.1 trillion, a gain of 6.8% from the same period in 2022. In addition to primary residence equity, households who own a primary residence almost always own other assets as well.
In contrast, households who do not own a primary residence (renters) neither accumulate wealth from home price appreciation, nor do they benefit from primary residence equity gains by paying down a home mortgage. Moreover, renters typically own a much smaller amount of other assets in aggregate than homeowners.
Both home equity and non-residence equity account for the wealth gap between homeowners and renters. It is useful to keep in mind that almost all households will spend time as a renter and time as an owner. Prior NAHB analysis1 indicates about 9 out of 10 households will be homeowners during some period of their lifetime. As such, while homeownership is key pathway for wealth accumulation, the rental market plays a role in this process as well, as most households will rent before they own a home.