America's median renters have $10,000 net worth, while homeowners have $400,000
The story of the housing market over the past few years has been characterized by a growing divide between "haves" and "have-nots" – those who own a home and those who rent. Existing homeowners in American have seen their wealth on paper explode as home prices have surged across the country. At the same time, after a slight dip in rents after the start of the COVID pandemic, rents have also spiked, eating into many people's savings.
A recent report from the Aspen Institute highlights the gaping wealth chasm that has formed between homeowners and renters in America. The median homeowner in America has a net worth of $400,000 as of 2022, the most recent data available, while the median renter's net worth is just $10,000, according to the report. That means the typical homeowner has almost 40 times as much wealth as the typical renter.
Those who want to buy their first homes have faced the one-two punch of rising home prices and stubbornly high mortgage rates. The median existing-home sales price was $407,200 in October, according to the National Association of Realtors. That’s the 16th consecutive month of year-over-year price gains.
At the same time, the days of sub-4% mortgage rates appear to be in the rear view window after the Federal Reserve began hiking interest rates to tackle inflation in 2022. On Wednesday, the Fed is widely expected to announce that it will slash interest rates for a third time this year. Still, the average 30-year fixed mortgage rate was 6.6% last week, according to Freddie Mac.
Owning a home has long been considered one of the best ways to build wealth in the US. As a homeowner pays down their mortgage, their home equity grows, and their property's value can appreciate. Some people may prefer the flexibility offered through renting, though — and the renter-homeowner wealth gap is not solely due to home equity. Nearly 80% of homeowners own a potentially appreciating asset other than their primary residence, which the Aspen Institute defines as retirement accounts, stocks and bonds, business equity, other real estate and other financial assets, including cryptocurrency. That compares to just 48% of renters who own those types of assets, according to the report.
It's not all bad news for renters, though. There are some signs the rental market could be cooling, providing a much-needed reprieve for renters whose budgets are already stretched thin. Rent prices dipped more than usual in November, according to a Zillow report released this month — and the share of rental listings on Zillow offering a concession also set a new record at 38.6% last month.
There's also been a construction boom in the rental market. One million new multifamily units that began construction in the past few years are expected to hit the market this year and next year, a more than 50-year high. That increased inventory could tamp down rent increases in the near future.
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