Why It’s So Hard to Build Wealth Right Now

By: Anneken Tappe · November 29, 2023 · Reading Time: 3 minutes

Any Time but the Present

The wild housing market is taking its toll. Buying a house is a key ingredient for wealth building, but many Americans aren’t able to do that.

The U.S. has been facing a deficit in housing units for years. That’s partially propping up home prices. When the Federal Reserve slashed interest rates to support the economy during the pandemic, low mortgage rates spurred a buying frenzy, which led to many sellers getting rid of their assets. But those days are gone. The Fed’s ultralow rates are long in the rearview mirror, and the central bank has aggressively hiked rates to curb high inflation, pushing up borrowing costs across the board. With fewer assets to buy and higher costs, Americans are looking at a wildly different housing market — again.

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Homeownership is a key part of building your net worth, as it accounts for such a large sum of money. Your net worth is the sum of your physical and financial assets, minus your liabilities or debts. In 2022, U.S. homeowners had a median net worth of just below $400,000, almost 40 times that of renters, according to data from the Federal Reserve.

Not to mention, over the past decade, median U.S. home values have shot up 58%, providing a sizable return for buyers.

With limited access to the housing market, it’s much more difficult for Americans to build wealth — for themselves, and for the generations to come.

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A staggering 75% of homes currently available on the market are out of reach for middle-class buyers. As a result, home sales fell to the lowest level in 13 years in September.

Thankfully, there are alternate routes for investing and building wealth. The S&P 500 is up nearly 19% this year, and the VIX index, a measure of market volatility, recently hit its lowest level since before the pandemic.

Looking for more stories like this? Check out On the Money — SoFi’s one-stop-shop for news, trends, and tips!

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