There are Numerous Benefits to Owning a Home Compared to Renting
In previous articles, I addressed the numerous benefits of buying a home in Northern Virginia compared to renting.  I showed that it surprisingly takes 20% less income to buy a home than it does to rent the same home. The U.S. tax code favors home ownership. Owning a home has several qualitative benefits including stability, positive impacts on child development and school performance, and fulfillment of the American dream.  Many renters are under the misconception that a mortgage loan is out of their reach and it requires a large down payment.  I also showed buying a home can be done with little to no down payment and across a wide range of credit scores. Credit scores under 620 can even qualify.

Home Ownership is the Proven Escalator to Wealth in America
By far, buying a home is the strongest path to wealth creation.  There are certainly a number of anecdotal quotes by successful real estate investors who address the subject.  Like David Bach from AE Wealth Management who said, "If you're not prioritizing home ownership, you are making a costly mistake.  Buying a home is the escalator to wealth in America.  Homeowners are worth forty times more than renters."  Then there's Thomas Stanley, author of The Millionaire Next Door who said, "There are under accumulators of wealth, average accumulators of wealth, and prodigious accumulators of wealth.  If you want to be a prodigious wealth accumulator, then own real estate."

Home Ownership Outperforms the Average Savings Rate by a Factor of 5X
Beyond the quotes, I try and open a person's eyes with numbers.  Numbers are an unambiguous arbiter and can often help people quickly understand exactly what's important.  The infographic below is the follow-up to my contribution last month.  Last month, I showed it takes $417/mo. less to own as it does to rent the same $340,000 townhouse in Falls Church 22043.  This cash benefit is primarily the result of federal and state tax benefits related to the mortgage interest and real estate tax deductions.  I now take it a step further and estimate the level of wealth creation attributed by the same piece of real estate.  In addition to the $417/mo. cash benefit that would otherwise be lost to a landlord by renting, the buyer grows equity through the amortized paydown of the loan principal.  Each monthly mortgage payment reduces the loan amount by $394.  However, the wealth accumulation effect does not end there. Since 1987, real estate has appreciated on average 3.75% per year.  I assume a conservative estimate below of just 3% appreciation, which produces an additional $850/mo. in wealth.  All told, the buyer of this home in Northern Virginia would amass nearly $100,000 in wealth in just five years, and nearly $200,000 in ten years.