A 2013 Federal Reserve survey revealed that homeownership declined over a span of three years, from 67.3 percent of families owning a primary residence in 2010 to 65.2 percent in 2013. However, the same study shows that homeowners are building more net worth than renters.
Danielle Hale, director of housing statistics for the National Association of Realtors, reported that information from the 2013 Federal Reserve Survey of Consumer Finances indicates that the net worth of the typical homeowner has ranged between 31 and 46 times that of the net worth of the typical renter over the past 15 years. According to the association’s Economists’ Outlook blog, the average homeowner boasts a net worth of $174,500, compared with the average renter’s $5,100 net worth. The median value of owners’ homes totaled $170,000.
“Homeowner equity is a substantial component of homeowner wealth,” Hale said.
The Fed’s Survey of Consumer Finances collects information every three years about family incomes, net worth, balance sheet components, credit use and other financial outcomes. The 2013 survey provides a view of changes to U.S. family finances since the 2010 survey.
“Not only can homeownership build wealth over time, but it strengthens communities and has been shown to reduce crime, improve education and increase community involvement,” said David Tonna, president of the Silicon Valley Association of Realtors. “But you want to make sure that you will be able to afford your house, be comfortable with your house payments and be able to keep your house.”
Tonna shared the following tips with prospective homebuyers.
• Save. Ideally, buyers should have 20 percent of the purchase price saved as a down payment. Closing costs average between 2 and 7 percent of the home price.
• Be cautious about paying the maximum, because you will want some reserve to enhance the home or purchase furnishings.
• Decide what you can afford. Generally, buyers can afford a home equal to between two and three times their gross income.
• Calculate costs of homeownership (i.e., taxes, insurance, utilities, etc.).
• Assemble your credit report and history.
• Determine mortgage qualifications. Research and explore all loan options.
• Get preapproved for a loan. Preapproval makes your offer more attractive to buyers.
• Select neighborhoods and remember to take into account schools, recreational facilities, area expansion plans, commute to and from work and safety in the area.
• Contact a realtor to help guide you through the process by providing market data, strategies, negotiating skills and reliable expertise.