Buying Remains Cheaper Than Renting in 39 States!

In the latest Rent vs. Buy Report from Trulia, they explained that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.

The updated numbers show that the range is an average of 3.5% less expensive in San Jose (CA), all the way up to 50.1% less expensive in Baton Rouge (LA), and 33.1% nationwide!

A study by GoBankingRates looked at the cost of renting vs. owning a home at the state level and concluded that in 39 states, it is actually ‘a little’ or ‘a lot’ cheaper to own (represented by the two shades of blue in the map below).

Buying Remains Cheaper Than Renting in 39 States! | Simplifying The Market

One of the main reasons owning a home has remained significantly cheaper than renting is the fact that interest rates have remained at or near historic lows. Freddie Mac reports that the current interest rate on a 30-year fixed rate mortgage is 3.91%.

Nationally, rates would have to reach 9.1%, a 128% increase over today’s average of 4.0%, for renting to be cheaper than buying. Rates haven’t been that high since January of 1995, according to Freddie Mac.

Bottom Line

Buying a home makes sense socially and financially. If you are one of the many renters who would like to evaluate your ability to buy this year, let’s get together and find you your dream home.

Which Homes Have Increased in Value the Most?

Home values have risen dramatically over the last twelve months. The latest Existing Home Sales Report from the National Association of Realtors puts the annual increase in the median existing-home price at 5.6%. CoreLogic, in their most recent Home Price Index Report, revealed that national home prices have increased by 6.7% year-over-year.

CoreLogic broke appreciation down ever further into four price ranges which gives a more detailed view than simply looking at the year-over-year increases of the national median home price.

The chart below shows the four tiers and each one’s growth from July 2016 to July 2017 (the latest data available).

Which Homes Have Increased in Value the Most? | Simplifying The Market

It is important to pay attention to how prices are changing in your local market. The location of your home is not the only factor in determining how much it has appreciated over the course of the last year. Lower priced homes have appreciated at greater rates than homes at the upper ends of the spectrum, due to demand from first-time home buyers and baby boomers looking to downsize.

Bottom Line

If you are planning on listing your home for sale in today’s market, let’s get together to go over exactly what’s going on in your area and your price range.

How Your Home’s Value Grows Your Family’s Wealth

Over the next five years, home prices are expected to appreciate 3.64% per year on average and to grow by 18.4% cumulatively, according to Pulsenomics’ most recent Home Price Expectation Survey.

So, what does this mean for homeowners and their equity position?

As an example, let’s assume a young couple purchased and closed on a $250,000 home in January. If we look at only the projected increase in the price of that home, how much equity will they earn over the next 5 years?

How Your Home’s Value Grows Your Family’s Wealth | Simplifying The Market

Since the experts predict that home prices will increase by 5.0% this year alone, the young homeowners will have gained $12,500 in equity in just one year.

Over a five-year period, their equity will increase by nearly $49,000! This figure does not even take into account their monthly principal mortgage payments. In many cases, home equity is one of the largest portions of a family’s overall net worth.

Bottom Line

Not only is homeownership something to be proud of, but it also offers you and your family the ability to build equity you can borrow against in the future. If you are ready and willing to buy, find out if you are able to today!

Homeowner’s Net Worth Is Still Greater Than a Renter’s

Every three years, the Federal Reserve conducts their Survey of Consumer Finances in which they collect data across all economic and social groups. The latest survey, which includes data from 2010-2013, reports that a homeowner’s net worth is 36 times greater than that of a renter ($194,500 vs. $5,400). 

The latest survey data, covering 2014-2016 will be released later this year. In the meantime, Lawrence Yun, the National Association of Realtors’ Chief Economist estimates that the gap has widened even further, to 45 times greater ($225,000 vs. $5,000)! 

Put Your Housing Cost to Work for You

As we’ve said before, simply put, homeownership is a form of ‘forced savings.’ Every time you pay your mortgage, you are contributing to your net worth. Every time you pay your rent, you are contributing to your landlord’s net worth.

The latest National Housing Pulse Survey from NAR reveals that 84% of consumers believe that purchasing a home is a good financial decision. William E. Brown comments:

“Despite the growing concern over affordable housing, this survey makes it clear that a strong majority still believe in homeownership and aspire to own a home of their own. Building equity, wanting a stable and safe environment, and having the freedom to choose their neighborhood remain the top reasons to own a home. 

Bottom Line

If you are interested in finding out if you could put your housing cost to work for you by purchasing a home, let’s get together and evaluate your ability to buy today!

Be Careful Not to Get Caught in The Rental Trap!

There are many benefits to homeownership. One of the top benefits is being able to protect yourself from rising rents by locking in your housing cost for the life of your mortgage.

Don’t Become Trapped 

A recent article by ConsumerAffairs addressed the continuous rise in rents, stating:

“The cost of putting a roof over your head continues to go up. Not only are home prices still rising, but the cost of rent rose 0.5% in June.”

Additionally, in the Joint Center for Housing Studies at Harvard University’s 2017 State of the Nation’s Housing Report, it was revealed that,

“Despite a slight improvement from 2014, fully one-third of US households paid more than 30 percent of their incomes for housing in 2015. Renters continue to be more likely to face cost burdens…the number of cost-burdened renters (21 million) considerably outstrips the number of cost-burdened owners (18 million) even though nearly two-thirds of US households own their homes.”

These households struggle to save for a rainy day and pay other bills, including groceries and healthcare.

It’s Cheaper to Buy Than Rent 

As we have previously mentioned, the results of the latest Rent vs. Buy Report from Trulia shows that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.

The updated numbers show that the range is an average of 3.5% less expensive in San Jose (CA), all the way up to 50.1% less expensive in Baton Rouge (LA), and 33.1% nationwide!

Know Your Options

Perhaps you have already saved enough to buy your first home. A nationwide survey of about 24,000 renters found that 80% of millennial renters plan to eventually buy a house, but 72% cite affordability as their primary obstacle. Aside from affordability, one in three millennial renters have concerns about their credit scores, and another 53% said that a down payment is an obstacle.

Many first-time homebuyers who believe that they need a large down payment may be holding themselves back from their dream homes. As we have reported before, in many areas of the country, a first-time home buyer can save for a 3% down payment in less than two years. You may have already saved enough!

Bottom Line

Don’t get caught in the trap that so many renters are currently in. If you are ready and willing to buy a home, find out if you are able. Let’s get together to determine if you can qualify for a mortgage now!

Americans Still Believe Real Estate is Best Long-Term Investment

According to Bankrate’s latest Financial Security Index Poll, Americans who have money to set aside for the next 10 years would rather invest in real estate than any other type of investment.

Bankrate asked Americans to answer the following question:

“What is the best way to invest money you wouldn’t need for 10 years or more?”

Real Estate came in as the top choice with 28% of all respondents (3% higher than last year), while cash investments – such as savings accounts and CD’s – came in second with 23% (the same as last year). The chart below shows the full results:

Best Investment | Simplifying The Market

The article points out several reasons for these results:

“After bottoming out at the end of 2011 following the worst housing collapse in generations, home prices have gone gangbusters recently, climbing back above their record pre-crisis levels. Prices jumped 6.6 percent during the 12 months that ended in May, according to CoreLogic.

Toss in persistently low interest rates, tax goodies that come with owning a mortgage, and the psychological payoff from planting your roots, and maybe it’s no wonder real estate remains popular.”

The article also revealed that:

“Bankrate’s Financial Security Index — based on survey questions about how people feel about their debt, savings, net worth, job security and overall financial situation — has hit its third-highest level since the poll’s inception in December 2010.”

Bottom Line

We have often written about the financial and non-financial reasons homeownership makes sense. It is nice to see that Americans still believe in homeownership as the best investment.

3 Tips to Succeed in Today’s Real Estate Market

In today’s highly competitive real estate market, where inventory levels are not keeping up with the constant stream of buyer demand, there are steps you can take to ensure you are most prepared for success when buying a home.

The 3 tips we are going to expand on today come from a recent blog by Trulia entitled, The Skinny on Skinny Inventory. 

1. Be Prepared

“Homebuyers should talk with a lender, real estate agent, and a home inspector BEFORE finding a home to make an offer on.”

Being intentional, pre-approved, and prepared will set you up for the accelerated time tables that come with a highly competitive market. If you are the most prepared buyer interested in a home, if you have already secured financial approval, and if you are ready to move fast, your bid will be that much more attractive to a seller.

2. Think Strategically

“Starter homebuyers don’t have a home to sell and can be flexible on closing dates compared to homebuyers who are also trying to sell at the same time.”

If you are one of the many first-time buyers looking for your dream home, know that being strategic and flexible about closing dates can also help your offer stand out from the rest. But don’t fret if you are a homeowner who will also have to sell your own house first – be upfront about your timeline with your agent and with any offers you make.

3. Seek Out the Ugly Ducklings

“Buyers might consider looking for homes that have been on the market for a while and investigate why. The reasons may be a deal-killer but all it takes is one ugly duckling to turn into a swan.”

Finding a fixer-upper or a home that needs a little love might be your best way to guarantee that you are able to find a home in the neighborhood that you want. The worst house on the best block will go for a steal and offer instant equity once you fix it up!

Bottom Line

In today’s market, full of bidding wars and tough competition, finding ways to stand out from the rest by getting creative will improve your chances of having a home to call your own.

The 5 Greatest Benefits of Homeownership

Recently, Freddie Mac reported on the benefits of homeownership. According to their report, here are the five benefits that “should be at the top of everyone’s list.”

  1. Homeownership can help you build equity over time.
  2. Your monthly payments will remain stable.
  3. You may have some tax benefits.
  4. You can take pride in ownership.
  5. Homeownership improves your community.

Let’s expand on each of Freddie Mac’s points:

Homeownership can help you build equity over time.

Every three years, the Federal Reserve conducts a Survey of Consumer Finances in which they collect data across all economic and social groups. The latest survey, which includes data from 2010-2013, reports that a homeowner’s net worth is 36 times greater than that of a renter ($194,500 vs. $5,400).

In a Forbes article, the National Association of Realtors’ (NAR) Chief Economist Lawrence Yun reported that now the net worth gap is 45 times greater.

Your monthly payments will remain stable.

When you purchase a home with a fixed rate mortgage, the majority of the payment (principle and interest) remain constant. On the other hand, rents continue to skyrocket. Your housing expense is much more stable if you own instead of rent.

You may have some tax benefits.

According to the Tax Policy Center’s Briefing Book -“A citizen’s guide to the fascinating (though often complex) elements of the federal Tax System” – there are several tax advantages to homeownership.

Here are four items from the Briefing Book:

  • Mortgage Interest Deduction
  • Property Tax Deduction
  • Imputed Rent
  • Profits from Home Sale

You can take pride in ownership.

Most surveys show that a major factor in purchasing a home is the freedom you have to design the home the way you want. From paint colors to yard accessories, you don’t need a landlord’s permission to make the house feel like a home.

Homeownership improves your community.

The National Association of Realtors recently released a study titled ‘Social Benefits of Homeownership and Stable Housing.’ The study explained:

“Homeownership does create social capital and provide residents with a platform from which to connect and interact with neighbors…Owning a home means owning part of a neighborhood, and a homeowner’s feelings of commitment to the home can arouse feelings of commitment to the neighborhood, which, in turn, can produce interactions with neighbors.”

Bottom Line

There are many benefits to homeownership. That is why it is still a critical piece of the American Dream.

Epic Housing Shortage Being Reported

The Joint Center of Housing Studies (JCHS) at Harvard University recently released their 2017 State of the Nation’s Housing Study, and a recent blog from JCHS revealed some of the more surprising aspects of the study.

The first two revelations centered around the shortage of housing inventory currently available in both existing homes and new construction.

Regarding Existing Home Inventory:

“For the fourth year in a row, the inventory of homes for sale across the US not only failed to recover, but dropped yet again. At the end of 2016 there were historically low 1.65 million homes for sale nationwide, which at the current sales rate was just 3.6 months of supply – almost half of the 6.0 months level that is considered a balanced market.”

Regarding New Home Inventory:

“Markets nationwide are still feeling the effects of the deep and extended decline in housing construction. Over the past 10 years, just 9 million new housing units were completed and added to the housing stock. This was the lowest 10-year period on records dating back to the 1970s, and far below the 14 and 15 million units averaged over the 1980s and 1990s.”

Bottom Line

The biggest challenge in today’s market is getting current homeowners and builders to realize the opportunity they have to maximize profit by selling and/or building NOW!!

2 Myths Holding Back Home Buyers

In Realtor.com’s recent article, “Home Buyers’ Top Mortgage Fears: Which One Scares You?” they mention that “46% of potential home buyers fear they won’t qualify for a mortgage to the point that they don’t even try.”

Myth #1: “I Need a 20% Down Payment”

Buyers overestimate the down payment funds needed to qualify for a home loan. According to the First Quarter 2017 Homeownership Program Index (HPI) from Down Payment Resource, saving for a down payment was the barrier that kept 70% of renters from buying.

Rob Chrane, CEO of Down Payment Resource had this to say,

There are many mortgage-ready renters today, but they don’t know it. Often, homebuyers remain sidelined for years due to the down payment.

Many believe that they need at least 20% down to buy their dream home, but programs are available that allow buyers put down as little as 3%. Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.

Myth #2: “I Need a 780 FICO® Score or Higher to Buy”

The survey revealed that 59% of Americans either don’t know (54%) or are misinformed (5%) about what FICO® score is necessary to qualify.

Many Americans believe a ‘good’ credit score is 780 or higher.

To help debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.

2 Myths Holding Back Home Buyers | Simplifying The Market

As you can see in the chart above, 53.2% of approved mortgages had a credit score of 600-749.

Bottom Line

Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Your dream home may already be within your reach.