From their credit scores to retirement savings to overall net worth, homeowners are ahead of renters on almost every financial metric. As a result, they are more than twice as likely as renters to report feeling financially stable.
That’s according to a new study from Credit Karma, which surveyed 1,006 adults in the U.S. on their net worth and other financial issues.
The findings are not necessarily surprising, as homeownership is considered one of the most effective ways for average Americans to build wealth. In fact, the Federal Reserve has found that homeowners have a median net worth 40 times that of renters. From 2010 to 2020, total housing wealth for middle-class households grew by $2.1 trillion.
But the data signifies how the fortunes of Americans who are able to buy a house and those who aren’t are diverging even further in the current economic environment.
Many owners were able to take advantage of historically low mortgage interest rates over the past few years, enabling them to build equity more quickly. Now, with interest rates on the rise and home prices increasing faster than income, current prospective buyers are being priced out of ownership completely.
At the same time, rent prices are also rising significantly, further hampering tenants’ ability to save money and build their net worth.
In some ways, financial stability in the U.S. “hinges” on whether or not someone is a homeowner, Credit Karma notes. The survey found that 81% of homeowners reported having a positive net worth, compared with 52% of renters. A quarter of renters report having $0 in savings, compared with 10% of homeowners.
Renters are also significantly less likely than owners to be saving for other goals, like retirement. Not quite 60% of renters report that they have started saving for retirement, compared with 85% of homeowners.
For those who want to become homeowners, it’s a difficult time, says Aniva Hinduja, general manager of home and mortgage at Credit Karma. But eventually, the market will come back around. In the meantime, Hinduja encourages renters to prioritize putting some money away if they can, contributing even $50 to $100 per month to a high yield savings or investment account.
“Make sure it’s an actively managed thing instead of something that happens in the background,” she says.