For those trying to buy a home, the process can be intimidating – but with new housing affordability data released, some renters may want to consider it.

According to a report published by First American, renters have been hit by the real estate market lately – while, on the other hand, homeowners have been increasing their equity.

Don’t miss

• Accredited investors can own Walmart, Whole Foods or Kroger – and enjoy regular distributions without lifting a finger. Here’s how

• Auto insurance premiums in the United States are skyrocketing – and only getting worse. But less than 2 minutes can you save over $600/year

• These 5 magical money moves will have you climbing the U.S. net worth ladder in 2024 — and you’ll be able to hit each step in minutes. Here’s how

For example, homeowners who purchased real estate in 2019 saw a wealth-generating profit of around $158,000 – while renters during the same period cumulatively lost $89,000, the data reveals.

Which begs the question: Is your house paying you to live there?

The house as a piggy bank

Of course, it’s not a piggy bank that you can regularly raid when you’re short on cash, but the single-family home can reliably store the bacon, thanks to the accumulation of equity.

These monthly mortgage payments, when not paying the interest on the homeowner’s loan, help build equity over time, which can be an important financial asset, along with the tax benefits of mortgage interest and property taxes deductible.

Let’s go back a few more years before the pandemic began, where First American found that homeowners who purchased property in 2014 fared particularly well.

Their calculations – based in part on data from Freddie Mac and the US Census Bureau – show a wealth-generating profit of almost a quarter of a million dollars ($225,000 to be more exact).

Renters, on the other hand, cumulatively lost $148,000: an amount that could have covered about 50% of the median listing value in Rockford, Illinois — the sixth-hottest real estate market in the country. according to Realtor.com.

Even homeowners who bought at the height of the 2006 housing boom saw a gain of $169,000, while renters lost $229,000, First American reported. But before you suggest that tenants are “throwing money down the drain,” ask some of them Why Owning a home isn’t always the best idea for building wealth.

For starters, renting provides greater flexibility to move for job opportunities, personal reasons or lifestyle changes without the burden of selling a property.

You can also avoid the large down payments and closing costs associated with purchasing a home.

Security deposits are generally cheaper and landlords usually take care of most (if not all) repairs and maintenance, saving tenants time, effort and money .

Learn more: Young, wealthy Americans abandon turbulent stock market here are the alternative assets they are banking on instead

Home ownership: advantages and disadvantages

Owning property stores wealth that has a price – or prices, if you prefer. From basic maintenance to possible major repairs, from alarm systems to alarming taxes, expenses may or may not exceed equity over time. So, is the pain worth the gain?

Advantages: No monthly payment manipulation: Landlords have largely cited supply issues to justify rising rents in recent years. unaffordability of apartments reached a record level.

However, this is not entirely accurate. ProPublica revealed that based in Texas Actual pages YieldStar software uses a mysterious algorithm that helps landlords get the highest possible rent rates for their tenants.

Disadvantage: Taxes and insurance: While rents have soared, property taxes in desirable areas have reached unprecedented levels.

In Cook County, which includes Chicago, some homeowners have seen the rates soar up to 1,000% in 2023. The irony is that, for many of those who live there, higher property values played a central role in this increase.

Meanwhile, homeowners insurance rates nationwide are expected to rise 6% throughout 2024, following increases of 20% over the past two years, according to Insurify. report.

Benefits: Body asset: Rent payments go directly to the landlord and offer no tax benefits.

When you take into account that real estate generally appreciates over time, potentially increasing the owner’s wealth, it’s easy to see where renters might experience remorse.

Homeownership rewards you with a tangible asset that you can pass down to your family, place in trust, or rent out if you move or have a spare room.

Disadvantage: Illiquidity, inconsistent wealth: Real estate wealth isn’t as easy to leverage as withdrawing from a bank account or stock portfolio: it only becomes fully available when you sell your property.

Additionally, the situation can become very unstable if real estate markets fluctuate in your area.

A throw, a sad truth

Accumulated equity can work in your favor if you sell and then move to an area with cheaper prices.

In Louisville, Kentucky, rents average $1,137 and the median home price is just above $227,414.

In this scenario, you could also go from owner to renter with significant monthly savings. Buy in Louisville with 10% off the current interest rate (6.79% for a Fixed mortgage over 30 yearsstarting November 7, 2024) will result in a monthly payment of $1,321, before taxes and escrow.

If you want to stay in the market you just cashed out in, you’ll now face the same hurdles as other buyers facing higher mortgage rates than at any time between June 2002 and October 2022, according to the Federal Reserve Bank from St. Petersburg. Louis.

Yet despite all the numbers, good and bad, one salient and sad fact remains: Many tenants saddled with inflated rents and more expensive expenses will find themselves moving backward, not forward, in pursuit of their “American Dream.” “.

Whether a new president can change that, given his previous track record of tax cuts and largely lopsided policies favoring the wealthy, could prove, at best, even more difficult.

What to read next

This article provides information only and should not be considered advice. It is provided without warranty of any kind.