compensation for actions taken through them.
The gulf in net worth between homeowners and renters is huge. According to a new Aspen Institute study, $400,000 is the net worth for homeowners, but it is only $10,400 for renters. The primary reason is the equity homeowners have built in their houses. This is about half their total homeowner advantage.
24/7 Wall St. Key Points:
- A recent analysis reveals that the gulf in net worth between homeowners and renters is huge.
- The demographics of the two groups are distinct as well.
- Take this quiz to see if you’re on track to retire. (sponsored)
There is a difference between the demographics of homeowners and renters. The authors of the study report, “Today’s 45 million renters in the United States are relatively young and diverse, representing the future of our economy.”
Renters have a median age of 42. Owners have a median age of 57. Renters have a median annual income of $40,291. Homeowners have a median yearly net worth of $92,310. Education is also a factor. Among renters, 30.7% have bachelor’s degrees or higher. The comparable figure for owners is 42.5%.
The bridge from renting to owning is difficult. Fifty-four percent of owners had positive cash flow in 2023. The figure was 39% for renters.
The path to ownership has probably gotten harder recently. However, the Aspen Institute does not analyze this. Mortgage rates are over 6% today. Three years ago, that was closer to 3%. This can add hundreds of dollars to mortgage payments. The average home price was $371,000 in early 2020. It is $502,00 today, according to the St. Louis Federal Reserve.
As home prices continue to rise, the number of renters who turn to owners could fall.
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