Owning vs. Renting: The Pathway to Wealth in Michigan
There have been so many articles comparing “owning vs. renting” that a Google search of the phrase yields page after page of results. Clearly, if you are at a crossroads trying to decide which of the two housing paths to take, there is no shortage of advice and information to guide your thinking.
The Experts Weigh In
Still, we were particularly struck by how forcefully the New York Times weighed-in on the debate. Late last year, the newspaper’s editorial board felt so strongly about the long-term benefits of owning a home that they published a lengthy opinion on their editorial page which concluded that “as a means to building wealth there is no practical substitute for homeownership.”
More recently, Lawrence Yun writing for Forbes Magazine, fielded some eye-opening statistics to advance the same argument. Because he is the chief economist for the National Association of REALTORS®, you would expect Yun to come down on the side of home ownership. But his dollars-and-cents contrast between the two housing options is so stark and revealing that it should give pause to anyone with the capacity to buy who instead is leaning towards renting.
CHIEF ECONOMIST AND SENIOR VICE PRESIDENT OF RESEARCH AT THE NATIONAL ASSOCIATION OF REALTORS®
Lawrence Yun is chief economist and senior vice president of Research at the National Association of REALTORS®. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1.1 million REALTOR® members. Dr. Yun creates NAR’s forecasts and participates in many economic forecasting panels, including Blue Chip and the Harvard University Industrial Economist Council. He appears regularly on financial news outlets and is a frequent speaker at real estate conferences throughout the United States. USA Today recently listed him among the top 10 economic forecasters in the country.
“The differences between buying and renting are massive,” Yun reports. “According to the Federal Reserve, a typical homeowner’s net worth was $195,400, while that of a renter was $5,400.” His point: Home ownership not only provides a place for your life to unfold, but also forces you to build wealth by simultaneously amassing home equity. Renting, on the other hand, typically builds wealth only for landlords.
The editorial also says that while renting may offer a more independent, carefree lifestyle, it has practically no potential for building wealth over the long term—unless the renter has enough discipline to regularly invest an amount equal to each month’s rent.