The Average Net Worth of Renters and Homeowners

Drs Producoes / Getty Images

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

Renters have historically had less net worth than homeowners, but the disparity has reached record levels in recent years. According to a study from the Federal Reserve’s Survey of Consumer Finances, renters have less than 3% of the wealth of homeowners — and things are getting worse.

From 1989 through 2022, a stretch of 33 years, the median wealth gap between renters and homeowners increased by a whopping 70%, and it appears to be still accelerating. This is due at least in part to the fact that only 39% of renter households earn more than they spend. That makes it difficult to save money for a down payment or afford a more costly mortgage.

With all this in mind, here’s a look at the difference in net worth between renters and homeowners, including an explanation of potential reasons and suggestions on how to transition from renter to homeowner.

Difference in Average Net Worth Between Renters and Homeowners

According to Federal Reserve statistics, the average net worth of an American homeowner is $430,000. Renters, on the other hand, have little to no net worth, with an average of just $10,000. That means the average homeowner is an incredible 43 times as wealthy as the average renter. 

Possible Reasons for the Disparity

When it comes to net worth, homeowners have an obvious advantage over renters — they have equity in their home. For most Americans, a home is the biggest asset they will ever own, often with net equity of hundreds of thousands of dollars or even more. 

Of course, this is also something of a self-fulfilling prophecy. Renters who transition to becoming homeowners already have a leg up in terms of net worth, as they must fork over a significant down payment and qualify for a loan with a monthly payment they can afford. 

But still, according to the Urban Institute Study, renters have less financial security across a variety of criteria. Renters have more debt, less positive cash flow, and lower rates of asset ownership and general savings. This is true across all income quintiles. 

Further, the wealth disparity is not entirely tied to home equity. Median home equity only represents about half of homeowners’ net worth, meaning much of their wealth comes from other assets. In fact, the data in the Urban Institute Study shows that while 78% of homeowners potentially appreciate assets beyond their homes, this is true for only 48% of renters. 

How Can Renters Become Homeowners?

Given the financial realities, it’s tough to make the jump from renter to homeowner. This has been particularly true during the past few years, when housing unaffordability has reached record levels. But the data clearly shows that owning a home is correlated with a higher net worth. If you’re a renter, here are some steps you can take to make the transition to being a homeowner:

• Do some research: The affordability of a home can vary wildly from state to state and city to city. If you can’t afford your dream home in your dream city, consider a starter home in an alternate location. A simple shift in zip code can end up saving you tens or even hundreds of thousands of dollars.
• Improve your credit score: The higher your credit score, the lower the interest rate you can get on a home loan. It’s really that simple. Knocking a few percentage points off your mortgage rate could potentially make the home you want to buy affordable. 
• Save as much as possible: There’s no getting around the fact that you’ll need to save a significant amount of money to purchase a home. In most cases, you should shoot for at least 20% of the home’s value so that you can avoid paying private mortgage insurance, or PMI. This is an added cost that you can avoid with a sizable down payment.
• Increase your income: While this may not be the easiest step, it’s the one that could have the biggest impact when it comes to being able to afford a home. Not only will a higher income give you a greater chance at mortgage loan approval, it will also help you afford both your monthly payment and your down payment. Consider working extra hours, picking up a side gig, or even looking for a new job that pays a higher salary in your quest to become a homeowner.

Share This Article: