Why buy? Net worth reaches all-time highs as home equity surges
Bottom Line: A few years ago Lisa Treu brought compelling research to me that demonstrated that exactly 90% of the average American's net worth was due to home equity. That was a few years ago when home values were still in recovery from the recession and before another three solid years of home appreciation. Fast forward to today and there's an incredible story that's rife with important takeaways.
We have a record $5.4 trillion in home equity right now! That's 10% more than the pre-crisis peak in 2005.
Remember during the recession when you might have been wondering if home values would ever recover? Anyway, back to an earlier point. The 90% net worth stat. If you don't own your home you're not only not participating in the record home equity and net worth, you likely have 90% less to show for your work. Moreover, on average it's still cheaper to buy a home and make a mortgage payment than it is to rent and make a monthly rental payment. 90% less to show for your work and it's more expensive? That's a no-brainier if you're positioned to buy and anticipate remaining in the home for at least three years. It's even more important right now as interest and mortgage rates are on the rise. While 30-year fixed rate mortgages are often 4.5+% right now (higher than they've been in recent years), they're still a song compared to the average 8.5% rate historically. Whether it's you or your kids this is a reminder that we shouldn't take these opportunities for-granted and owning your home is always better than renting over the long run. It also segues into my first rule of retirement. A mortgage isn't a retirement plan. For many, at the point when they own the roof over their heads outright, they're properly positioned for a successful retirement.