The Benefits and Role of Homeownership in Wealth Accumulation
Homeownership provides numerous advantages to households, offering not only a stable living environment but also a valuable opportunity to accumulate wealth over time through the building of equity. By 2022, 66.1% of U.S. households were homeowners, highlighting the significance of homeownership in American life. For those who owned homes, the median net housing value (the value of the home minus any home-secured debt) saw a substantial increase from $139,000 in 2019 to $201,000 in 2022, driven by rising home prices and relatively stable mortgage debt.
This article delves into the findings from the 2022 Survey of Consumer Finances (SCF), a detailed triennial survey of U.S. family finances conducted by the Board of Governors of the Federal Reserve System. Unlike the quarterly Financial Accounts of the United States, which provides aggregated data on household balance sheets, the SCF offers granular, family-level insights into household finances, collected every three years since 1989.
Homeownership: A Key Component of Household Wealth
Homeownership plays a critical role in wealth accumulation for households. According to the 2022 SCF data, the primary residence continues to be the largest asset category on household balance sheets. In 2022, the total value of primary residences across the U.S. stood at $40.9 trillion, accounting for over a quarter of all household assets. This figure surpasses other significant asset categories such as business interests (20%, $30.8 trillion), other financial assets (19%, $29.8 trillion), and retirement accounts (15%, $23.8 trillion).
The primary residence not only represents the largest asset category but is also widely held by households. In 2022, approximately 66% of households owned a primary residence. In contrast, just over half of households (54%) held retirement accounts, and 21% owned stocks or bonds. Other financial assets, such as checking accounts, money market accounts, and prepaid debit cards, were held by 99% of households, serving more for transactional purposes than wealth accumulation.
Wealth Distribution Across Age Groups
The total value of assets varies significantly across age groups. In 2022, households under the age of 35 held assets totaling $7.6 trillion, while households aged 65 or older held assets valued at $65.9 trillion. This stark difference illustrates how the value of assets typically increases with age.
The composition of assets on household balance sheets also changes with age. For households under 65, the primary residence is the largest asset category. However, for those aged 65 or older, other financial assets surpass the primary residence as the largest asset category. Although the value of the primary residence increases with age, its share of total assets decreases, reflecting a shift toward other asset categories such as stocks, bonds, and retirement accounts.
The Impact of Educational Attainment on Wealth
Educational attainment is closely linked to the value of assets held by households. Households with a bachelor’s degree or higher hold assets valued at five times those held by households with some college or an associate degree.
While the primary residence remains the largest asset category across all educational levels, its share of total assets varies. For households with a bachelor’s degree or higher, the primary residence represents 23% of total assets, with significant holdings in business interests, other financial assets, and retirement accounts. In contrast, for households without a high school diploma or GED, the primary residence accounts for half of their total assets.
In conclusion, homeownership is a cornerstone of wealth accumulation in the U.S., with its importance varying across different age and education groups. As households age or achieve higher educational levels, their asset portfolios diversify, reflecting broader opportunities for wealth building beyond homeownership.
