The housing market has made a strong recovery, not only in sales and prices, but also in the confidence of consumers and experts as an investment. In a New York Times editorial entitled, “Homeownership and Wealth Creation” they explain:
“Homeownership long has been central to Americans’ ability to amass wealth; even with the substantial decline in wealth after the housing bust, the net worth of homeowners over time has significantly outpaced that of renters, who tend as a group to accumulate little if any wealth.”
Many of the points that were made in the article are on track with the research that the Federal Reserve has also conducted in their Survey of Consumer Finances.
The study found that the average net worth of a homeowner ($194,500) is 36x greater than that of a renter ($5,400).
The National Association of Realtors (NAR) expanded on the Federal Reserve’s research and projected that by the end of 2015, the average homeowner will have nearly 41x the net worth of a renter. Their findings are detailed in the graph below:
Some experts are advising that first time and move-up buyers wait until they save up 20% before they move forward with their decision to purchase a home. One of the main reasons they suggest waiting is that a buyer must purchase private mortgage insurance if they have less than the 20%. That increases the monthly payment the buyer will be responsible for.
In a recent article, Freddie Mac explained what this would mean for a $200,000 house:
However, we must look at other aspects of the purchase to see if it truly makes sense to wait.
Are you actually saving money by waiting?
CoreLogic has recently projected that home values will increase by 4.3% over the next 12 months. Let’s compare the extra cost of PMI against the projected appreciation:
There are many benefits to homeownership. One of top ones is being able to protect yourself from rising rents and lock in your housing cost for the life of your mortgage.
The National Association of Realtors (NAR) released their findings of a study in which they studied “income growth, housing costs and changes in the share of renter and owner-occupied households over the past five years in metropolitan statistical areas throughout the US.”
Don’t Become Trapped
The study revealed that over the last five years a typical rent rose 15% while the income of renters grew by only 11%. If you are currently renting, this disparity in growth could get you caught up in a cycle where increasing rents continue to make it impossible for you to save for a necessary down payment.
The average renter in the United States pays 30% of their income on housing compared to that of a homeowner who can expect to spend 15%.
In many metro areas the percentage of income spent on housing is even higher and continues to rise every year. Like in San Francisco, CA, where the average renter spends 59% of their monthly income on housing or nearly 65% in Boston, MA.
You’ve decided to sell your house. You begin to interview potential real estate agents to help you through the process. You need someone you trust enough to:
Set the market value on possibly the largest asset your family owns (your home)
Set the time schedule for the successful liquidation of that asset
Set the fee for the services required to liquidate that asset
An agent must be concerned first and foremost about you and your family in order to garner that degree of trust. Make sure this is the case.
Be careful if the agent you are interviewing begins the interview by:
Bragging about their success
Bragging about their company’s success
An agent’s success and the success of their company can be important considerations when deciding on the right real estate professional to represent you in the sale of the house. However, you first need to know they care about what you need and what you expect from the sale. If the agent is not interested in first establishing your needs, how successful they may seem is much less important.
Look for someone with the ‘heart of a teacher’ who comes in prepared well enough to explain the current real estate market and patient enough to take the time to show how it may impact the sale of your home.
Not someone only interested in trying to sell you on how great they are.
You have many agents from which to choose. Pick someone who truly cares.
The national median home price for Q2 is up 8.2% to $229,400
The income needed to afford the median home in each region is directly impacted by the amount of the down payment. The larger the down payment the lower the income needed to pay the monthly mortgage payment.
The West led the way with the highest median home price at $325,200.
Digital Risk recently polled Millennials about the housing market. Among their findings was the fact that nearly two-thirds of the generation who have recently purchased a home, have done so with less than 20% down; with 36% putting down less than 5%!
Here is a graph detailing the results:
This means that more and more American’s between the ages of 18 and 34 stopped paying their landlord’s mortgage and started building their own family’s wealth.
Millennials aren’t the only ones taking advantage of lower down payments.
The Federal Reserve Bank of New Yorkfound that if the down payment required to purchase a home went from 20% to 5%, a renter’s Willingness To Pay (WTP) increased by 40%.
Today, many real estate conversations center on housing prices and where they may be headed. That is why we like the Home Price Expectation Survey.
Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists about where prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.
The results of their latest survey
Home values will appreciate by 4.1% in 2015.
The cumulative appreciation will be 18.1% by 2019.
That means the average annual appreciation will be 3.4% over the next 5 years.
Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of 10.5% by 2019.
Individual opinions make headlines. We believe the survey is a fairer depiction of future values.
We often talk about the financial reasons why buying a home makes sense. But often, the emotional reasons are the more powerful, or compelling reasons. The Joint Center for Housing Studies at Harvard University performs a study every year surveying participants for the reasons that American’s feel are most important in regards to homeownership.
The top 4 reasons to own a home cited by respondents were not financial.
1. It means having a good place to raise children & provide them with a good education
From the best neighborhoods to the best school districts, even those without children at the time of purchasing their home, may have this in the back of their mind as a major reason for choosing the location of the home that they purchase.
2. You have a physical structure where you & your family feel safe
It is no surprise that having a place to call home with all that means in comfort and security is the #2 reason.
3. It allows you to have more space for your family
Whether your family is expanding, or an older family member is moving in, having a home that fits your needs is a close third on the list.
4. It gives you control over what you do with your living space, like renovations and updates
Looking to actually try one of those complicated wall treatments that you saw on Pinterest? Want to finally adopt...
People often ask whether or not now is a good time to buy a home. No one ever asks when a good time to rent is. However, we want to make certain that everyone understands that today is NOT a good time to rent.
The Census Bureau just released their second quarter median rent numbers. Here is a graph showing rent increases from 1988 until today:
At the same time, a report by Axiometrics revealed:
“The national apartment market’s annual effective rent growth rate of 5.1% in June 2015 represented a 47-month high, and continued a streak of 5.0%-plus rent growth that is now the longest in at least six years, according to apartment market research. The effective rent growth in June 2014 was 3.7%, putting June 2015’s exceptional performance into perspective.
This is the highest rate since the 5.3% of July 2011. The metric has reached at least 5.0% for...
Now that the housing market has stabilized, more and more homeowners are considering moving up to their dream home. With interest rates still near 4% and home values on the rise, now may be a great time to make a move.
Sellers should realize that waiting while mortgage rates are increasing probably doesn’t make sense. As rates increase, the price of the house you can afford will decrease if you plan to stay within a certain budget for your monthly housing costs.
Here is a chart detailing this point:
With each quarter percent increase in interest rate, the value of the home you can afford decreases by 2.5%, (in this example, $10,000). Experts predict that mortgage rates will be closer to 5% by this time next year.
Act now to get the most house for your hard earned money.
The interest rate you pay on your home mortgage has a direct impact on your monthly payment. The higher the rate the greater the payment will be. That is why it is important to look at where rates are headed when deciding to buy now or wait until next year.
There is a plethora of real estate information available today in the news and on the internet. It can be extremely confusing at times.
If you are thinking of buying or selling, you need an agent who can help make sense of this rapidly evolving housing market. You need an agent who can help you price your home correctly at the beginning of the selling process. You need an agent who can help you determine what to offer on your dream home without paying too much or offending the seller with a low-ball offer.
Dave Ramsey, the financial guru advises:
“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”
Hiring an agent who has their finger on the pulse of the market will make your buying/selling experience so much easier.
But, how do you identify which agents truly understand what is happening and will take the time to simply and effectively explain what it means to you and your family?
One simple way is to check out the agent on social media. What are they posting on Facebook and Twitter? Are they using their social media platforms to share relevant, helpful information or are they just posting cherry pie recipes and cartoons? The best agents are committed to educating the consumer so they can feel...
In today’s market, where demand is outpacing supply in many regions of the country, pricing a house is one of the biggest challenges real estate professionals face. Sellers often want to price their home higher than recommended, and many agents go along with the idea to keep their clients happy. However, the best agents realize that telling the homeowner the truth is more important than getting the seller to like them.
There is no “later.”
Sellers sometimes think, “If the home doesn’t sell for this price, I can always lower it later.” However, research proves that homes that experience a listing price reduction sit on the market longer, ultimately selling for less than similar homes.
John Knight, recipient of the University Distinguished Faculty Award from the Eberhardt School of Business at the University of the Pacific, actually did research on the cost (in both time and money) to a seller who priced high at the beginning and then lowered the their price. In his article, Listing Price, Time on Market and Ultimate Selling Price published in Real Estate Economics revealed:
“Homes that underwent a price revision sold for less, and the greater the revision, the lower the selling price. Also, the longer the home remains on the market, the lower its ultimate selling price.”
Additionally, the “I’ll lower the price later” approach can paint a negative image in buyers’ minds. Each time a price reduction occurs, buyers can naturally think, “Something must be wrong with that house.” Then when a buyer does make an offer,...