The Cost of Waiting to Buy a Home: Renter vs. Homeowner Net Worth
- abrahamrotholz
- May 12
- 3 min read
Homeownership is one of the largest drivers of wealth creation in America and the data is astonishing. The Average renter has a net worth of only $10,000 while the average homeowners net worth is 40 times that at $400,000 and here's why...
It's not that the average homeowner has $400,000 liquid capital in the bank, they likely have a very similar bank account to the renter. It's that they have leveraged the power of homeownership, a mortgage and equity. When your home goes up 6% every year in value and you bought a $1,000,000 house with the bank's money, you just made $60,000 in the first year, and by year 5 you have made $338,000 passive income, and you did it with someone else's money and massive tax write-offs every year.
The cost of waiting is astronomically damaging to your family and your future. If you wait 5 years, that million dollar house will now cost you $1,338,000, all the while you are putting homeownership farther and farther out of reach, making your landlord rich and missing out on enormous tax write-offs.
In 1977 if you would have waited for interest rates to come down, you would have waited until 1993! We will more than likely never see 3% interest rates ever again in our lifetime, that happens once every hundred years and requires a worldwide pandemic, global shutdown and catastrophic economic collapse all at once.
5% is the historical average low, in 1981 rates were at 18%!
Today's rate of 6.8% is actually a pretty low rate in the grand scheme of things and not very far off from 5%, likely the lowest it will get. Most importantly, that 1.8% doesn't make as much of a difference in your mortgage payment as you might think and it's temporary.
We will likely never see a housing crash to parallel the 2008 crash. After the subprime mortgage crash, caused by lenders lending anyone with a pulse money for a home they can't afford, today's lending practices are the exact opposite. They only lend money to incredibly over qualified buyers who are very unlikely to default on their mortgage. Couple that with the lack of inventory on the market because everyone refinanced at 3% and we are living in a very stable and protected housing market that is almost impossible to crash. When the stock and money markets are volatile, housing becomes one of the only stable investments and this drives up the cost of homes even further.
If you're waiting for houses to come down in value or rates to come down, you are putting yourself in a colossal disadvantage. Don't compare today's market to 2021 and 3% rates, look at the big picture, zoom out over 30-40 years and it becomes a lot more clear where the market is headed and how much opportunity you actually have today.
Buyers are all sitting on the sideline and they will all jump in the market at the same time when rates come down just a little bit more, and they will all contribute to an insanely competitive market where every home is getting 10-20 offers and selling several hundreds of thousands over list price.
The savvy buyer, the buyer with vision, buys now while there is no competition and refinances when the rates come down, and laughs all the way to the bank with their 6% compounding equity every year. Eventually they hand a multi million dollar investment over to their children and grandchildren who will never be able to afford a home.
At the time of home purchase it always seems like a high price to pay, but when you look back it was always worth it 10x.
My grandfather bought his house in 1964 for $12,000 and he was convinced he had overpaid.
Date the rate, marry the home. Almost everyone refinances over the life of 30 year mortgage, even people who took a 2.5% rate.
Federal Reserve 30-Year Fixed Mortgage Average In The United States
Book a consultation and let's start building your families generational wealth and stop building your landlords.
Abraham Rotholz
DRE#02222891
(925) 305 3559
Real Brokerage - The fastest publicly traded Real Estate Brokerage in the world!
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