Building for the Future:

Why Home Ownership is Critical to your Retirement Plans!

Entering the housing market as a first-time homeowner can feel daunting and overwhelming. The complexities of navigating mortgage options, finding the right neighborhood, and managing the financial commitment can intimidate even the most prepared buyers.

However, despite these challenges, research consistently highlights that homeownership is not just a milestone—it's a vital component of a successful retirement strategy. Owning a home provides stability and equity, allowing individuals to build wealth over time.

Recent research and surveys from Statistics Canada have highlighted a significant wealth disparity between homeowners and renters in Canada, including Ontario. This gap has been growing over the years, with homeownership emerging as a key factor in wealth accumulation. Here's a detailed overview of the findings:

Statistics Canada's latest financial security survey, conducted in 2023, revealed stark differences in wealth between homeowners and renters.

Families (aged 55-64) who owned their home and had an employer-sponsored pension had a median net worth of $1.4 million.
Renters in the same age group without a pension plan had a median net worth of only $11,900.

The survey also showed similar disparities for younger families:

Families under 35 who owned their principal residence had a median net worth of $457,100.
Renters in the same age group had a median net worth of $44,000.

Home ownership emerged as the primary factor in wealth accumulation. Homeowners who didn't have a pension had a median net worth of $914,000. Those with a pension, but who didn't own a home, had a median net worth of $359,000.

The gap in wealth accumulation is further exacerbated by the difference in how renters and homeowners allocate their income. In 2022, renters devoted 29% of their after-tax earnings to housing. Homeowners allocated 21% of their after-tax-earnings to housing,, while also contributing to building home equity.

The wealth gap between homeowners and renters has been widening over time. Since 2010, homeowners' net worth grew from 9 times household disposable income to 13 times. For renters, net worth only grew from 3 times to 3.5 times over the same period.

The current trends suggest that the wealth inequality between homeowners and renters is likely to worsen for younger generations, as this wealth gap continues to widen and trickle down. The affordability crisis makes it increasingly difficult for renters to enter the housing market. This threatens renters' path to accumulating wealth and could exacerbate inequality over the longer term.

While it may seem self-serving for the real estate industry to be pushing for solutions to our current housing shortages, the historical data shows that owning your own home is a major contributor to wealth accumulation and security in retirement years. What we want our clients to understand is that not only is buying a good financial investment now, but also carries a significant investment in your future - like saving for retirement.

We may not be able to control interest rates, or what types of homes are being built or are currently on the market, but what we can control is the conversation and the actions taken to gain a foothold in the real estate market. With challenging markets like we have now, it takes creativity and a strategic plan to gain entry. The struggle to get into the real estate market has always been a part of the process. If we continue to rely on the various levels of government to step in and solve the problem, we will just continue to get piecemeal short-term solutions.

Let’s take the initiative and let’s start the conversation.

As you consider your long-term financial future, understanding the benefits of homeownership can empower you to make informed decisions that will set the foundation for a secure and fulfilling retirement. To discuss further, please reach out to our team - we are here to have these types of conversations!

Thank you for being part of the Guelph real estate community.

Enjoy the first weekend of November!

Paul Fitzpatrick

Appointment Calendar: https://calendly.com/homegrouprealty

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