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Source: KCM
During the housing market crash, Gen X homeowners lost more wealth than other generations. However, things are changing now! A strong economy, increasing home prices, and the recovery of the housing market are helping this generation to regain their lost wealth.
According to Pew Research Center,
“Their fortunes have rebounded more than those of other generations during the post-recession economic expansion and as home and stock prices have risen. Since 2010, the median net worth of Gen X households has risen 115%. In fact, in 2016, the most recent year with available data, the net worth of a typical Gen X household had surpassed what it was in 2007 ($84,200 vs. $63,400)”.
The same report also mentioned,
“15% of Gen X’s homeowners were ‘underwater’ on their homes in 2010 (meaning they owed more than they owned). By 2016 only 3% were underwater.”
As a result of homes regaining market value and their increasing net worth, many Gen Xers are presented with the opportunity of selling their current home in order to move up to the house they always dreamed of!
According to the 2019 Home Buyers and Sellers Generational Trends Report by the National Associations of Realtors, in 2018 Gen Xers made up the second largest share of home buyers by generation at 24%.
The report also provided some highlights about their purchase:
But this generation is not only buying- they are selling too!
If you are a Gen Xer who would like to know exactly how much your house is worth today so you can move up to the home of your dreams, let’s get together to analyze your current circumstances.
Source: KCM
A lot is happening in the world, and it’s having a direct impact on the housing market. The reality is this: some of it is positive and some of it may be negative. Some we just don’t know yet.
The following three areas of the housing market are critical to understand: interest rates, building materials, and the outlook for an economic slowdown.
1. Interest Rates
One of the most important things to consider when buying a home is the interest rate you will be charged to borrow the money. In our recent post we posed the question, “Are Low Interest Rates Here To Stay?” The latest information from Freddie Mac makes it appear they are. We are currently at a 21-month low in interest rates.
2. Building Materials
Talk of tariffs could also affect the housing market. According to a recent article, the National Association of Home Builders reports that as much as $10 billion in goods imported from China are used in homebuilding. Depending on the outcome of the tariff and trade discussions between several countries, there could be as much as a 25% boost in the cost of building materials.
3. Economic Slowdown
In a prior blog post on this topic, we began the year with many economic leaders thinking we could expect a recession in late 2019 or early 2020. As spring approached, we reported that economists had started to push that projection past 2020. Now, three leading surveys indicate that it may begin in the next eighteen months.
We are in a strong housing market. Wages are increasing, home prices are appreciating, and mortgage rates are the lowest they have been in 21 months. Whether you are thinking of buying or selling, it’s a great time to be in the market.
Source: KCM
In a real estate market where home prices are rising, many have begun to reexamine the idea of buying a home, choosing instead, to rent for a while. But often, there is a dilemma: should you keep paying rent, knowing that rent is rising too, or should you lock in your housing cost and buy a home?
With the housing market crash in 2008, many homeowners lost their homes and became renters. According to Iproperty Management, “the number of households renting their home … rose from 31.2% of households in 2006 to 36.6% in 2016”.
Some choose to rent because it is more convenient for their lifestyle. Those whose job requires frequent moves need the flexibility that a 6-12 month lease agreement gives them so they can move to their next assignment!
Many renters believe that renting is cheaper because they do not have to pay for maintenance and repairs. (Not true! Landlords work those expenses into your rent and other fees). Another reason many rent is that they feel like they cannot afford the down payment and closing costs required to buy a house, due to their inability to save much after paying their monthly expenses.
That can be true! Nearly 1 in 4 renters spend at least half their household income on rent. In 2017 the “severely” burdened renters’ rate was 24.7% with 24.9% reporting they were “moderately” burdened.
Renting also brings some financial disadvantages. Homeowners can take advantage of tax deductions that let them claim their property taxes and mortgage interest. Additionally, there is a big risk that your rent will go up every time you renew your lease, as we know the median asking rent has been increased steadily since 1988!
One of the major challenges with renting is that you don’t have a space to call your own. When you rent, you are paying your landlord’s mortgage, and therefore they are the beneficiaries of the equity gained from paying that mortgage.
In the past, we have mentioned the many financial and non-financial benefits of becoming a homeowner. So, let’s just focus on the one big difference between renting and owning, the ability to lock in your housing cost!
Assuming you will have a fixed-rate mortgage, your costs are predictable! You will know exactly what your mortgage payment will be for the next 15-30 years. The homeownership rate in 2018 was 64.4%, and has been on the rise. Those households locked in their housing cost rather than wait for their landlord to raise their rent again!
What are the disadvantages of owning a home? Well, it is a long-term financial commitment! It is not easy to pack quickly and move. You will need time and good planning to do it in a short amount of time.
You need to save your money! Getting a mortgage requires a down payment, closing costs, and moving expenses. Again, that will require some savings and planning!
Unless you have a homeowner’s association (HOA) (and you pay an HOA fee) or a home warranty, you will be responsible for maintenance and taking care of the home. This may range anywhere from regular landscaping to major repairs.
Like everything in life, there are pros and cons. What is better for you depends on your situation! If you are interested in becoming a homeowner and want to discuss the pros and cons, let’s get together to help you review your current situation and answer any questions you may have!
Source: KCM
Freddie Mac recently released a report entitled, “Perceptions of Down Payment Consumer Research.” Their research revealed that,
“For many prospective homebuyers, saving for a down payment is the largest barrier to achieving the goal of homeownership. Part of the challenge for those planning to purchase a home is their perception of how much they will need to save for the down payment…
…Based on our recent survey of individuals planning to purchase a home in the next three years, nearly a third think they need to put more than 20% down.”
Buyers often overestimate the funds needed to qualify for a home loan. According to the same report:
22% of renters and 31% of homeowners believe lenders require 20% or more of a home’s sale price as a down payment for a typical mortgage today. And,
“If a 20% down payment was required, 70% of those who were planning to buy a home in the next three years said it would delay them from purchasing and nearly 30% indicated they would never be able to afford a home.”
While many believe at least 20% down is necessary to buy the home of their dreams, they do not realize programs are available which permit as little as 3%. Many renters may actually be able to enter the housing market sooner than they ever imagined!
Many either don’t know or are misinformed concerning the FICO® score necessary to qualify, believing a ‘good’ credit score is 780 or higher.
To debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.
As indicated in the chart above, 52.4% of approved mortgages had a credit score of 600-749.
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.
Source: KCM
If you are a “baby boomer” (born between 1946 and 1964), you may be thinking about selling your current home. Your children may have finally moved out. Your large, four-bedroom house with three bathrooms no longer fits the bill. Taxes are too high. Utilities are too expensive. Cleaning and repair are too difficult. You may be ready to move into a home that better fits your current lifestyle. Many fellow boomers have already made the move you may be considering.
The National Association of Realtors recently released their 2019 Home Buyer and Seller Generational Report. The report revealed many interesting tidbits about both categories of baby boomers: younger boomers (ages 54 to 63) and older boomers (64 to72). Here are a few of the more interesting topics.
The two major ways buyers found the home they purchased:
The distance between the home they purchased and the home they recently sold was much greater for boomers than the average seller.
The percentage of older boomers who lived in their previous home for more than 20 years was almost twice the amount of the average seller.
If you are a boomer and thinking about selling, now might be the time to contact an agent to help determine your options.
Source: KCM
We often talk about the financial reasons why buying a home makes sense. But, more often than not, the emotional reasons are the more powerful and compelling ones.
No matter what shape or size your living space is, the concept and feeling of home can mean different things to different people. Whether it’s a certain scent or a favorite chair, that feeling of safety and security you gain from owning your own home is simultaneously one of the greatest and most difficult to describe.
Frederick Peters, a contributor for Forbes, recently wrote about that feeling, and the pride that comes from owning your own home.
“As homeowners discover, living in an owned home feels different from living in a rented home. It’s not just that an owner can personalize the space; it touches a chord even more fundamental than that.
Homeownership enhances the longing for self-determination at the heart of the American Dream. First-time homeowners, young or old, radiate not only pride but also a sense of arrival, a sense of being where they belong. It cannot be duplicated by owning a 99-year lease.”
Owning a home brings a sense of accomplishment and confidence that cannot be achieved through renting. If you are debating renewing your lease, let’s get together before you do to answer any questions you may have about what your next steps should be, and what is required in today’s market!
Source: KCM
There are many financial benefits to homeownership, but probably none more important than its ability to create family wealth.
How Housing Matters is a joint project of the Urban Land Institute and the MacArthur Foundation. It is an online resource for research and information on how homeownership contributes to individual and community success.
Their article, The First Rung on the Ladder to Economic Opportunity Is Housing, explains the importance of homeownership to a family’s financial health. In that article, they simply stated:
“The ladder to economic success can stretch only so high without the asset-building power of homeownership.”
To this point, National Association of Realtors’ (NAR) Economists’ Outlook Blog revealed in a recent post:
“Housing wealth contributes positively to the homeowner’s and children’s economic condition, because home equity can be tapped for expenditures such as investing in another property (which can generate rental income), home renovation (which further increases the home value), a child’s college education, emergency or major life events, or expenses in retirement…
Housing wealth (or net worth or equity) is built up over time via the home price appreciation and the principal payments that the homeowner makes on the loan.”
Here is a graph showing the build-up of wealth over time:
Just last month, NAR’s Chief Economist, Lawrence Yun, explained that even though home appreciation has slowed, homeowners are still building wealth:
“Homeowners in the majority of markets are continuing to enjoy price gains, albeit at a slower rate of growth. A typical homeowner accumulated $9,500 in wealth over the past year.”
This wealth is important to a family’s retirement plans. In a recent report from the Joint Center for Housing Studies at Harvard University titled, Housing America’s Older Adults 2018, they revealed that a renter 65 years old or older has a net worth of $6,710. Meanwhile, a homeowner 65+ years old has a net worth of $319,200. That huge difference will allow for a dramatic upgrade in one’s lifestyle during your retirement years.
Homeownership builds wealth. This, in turn, allows families to have more and better options when it comes to their children and their life in retirement.
Source: KCM
Here are four reasons to consider buying today instead of waiting.
CoreLogic’s latest U.S. Home Price Insights reports that home prices have appreciated by 3.7% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 4.8% over the next year.
Home values will continue to appreciate. Waiting may no longer makes sense.
Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year fixed rate mortgage have started to level off around 4.3%. Most experts predict that rates will rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac, and the National Association of Realtors are in unison, projecting rates will increase by this time next year.
An increase in rates will impact YOUR monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home.
Some renters have not yet purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.
As an owner, your mortgage payment is a form of ‘forced savings’ which allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.
Are you ready to put your housing cost to work for you?
The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.
But what if they weren’t? Would you wait?
Examine the actual reason you are buying and decide if it is worth waiting. Whether you want to have a great place for your children to grow up, greater safety for your family, or you just want to have control over renovations, now could be the time to buy.
If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.
Source: KCM
