Attaining the American Dream: The 5 Financial Reasons to Buy

Attaining The American Dream: The 5 Financial Reasons to Buy | Keeping Current Matters

We have reported many times that the American Dream of homeownership is alive and well. The personal reasons to own differ for each buyer, with many basic similarities.

Eric Belsky, the Managing Director of the Joint Center of Housing Studies at Harvard University expanded on the top 5 financial benefits of homeownership in his paper –The Dream Lives On: the Future of Homeownership in America.

Here are the five reasons, each followed by an excerpt from the study:

1.) Housing is typically the one leveraged investment available.

“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

2.) You’re paying for housing whether you own or rent.

“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”

3.) Owning is usually a form of “forced savings”.

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

4.) There are substantial tax benefits to owning.

“Homeowners are able to deduct mortgage interest and property taxes from income…On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”

5.) Owning is a hedge against inflation.

“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”

Bottom Line

We realize that homeownership makes sense for many Americans for an assortment of social and family reasons. It also makes sense financially. If you are considering a purchase this year, contact us and we can help evaluate your ability to do so.

 

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Pending Sales Surge: Great Sign for the Housing Market

Pending Sales Surge: Great Sign for the Housing Market | Keeping Current Matters

The most recent Pending Homes Sales Index from the National Association of Realtors revealed that homes going into contract in February increased to their highest level since June 2013.

The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The Index is now 12.0 percent above February 2014. The index is at its highest level since June 2013, has increased year-over-year for six consecutive months and is above what is considered “the average level of activity” – for the 10th consecutive month.

Here is a graph showing the Pending Sales numbers:

Pending Home Sales | Keeping Current Matters

Here is a chart showing the Pending Sales increases by region:

Pending Home Sales By Region | Keeping Current Matters

Bottom Line

In an article from Investors’ Business Daily, Lawrence Yun, Chief Economist at the National Association of Realtors, explained what these numbers will mean to the overall market:

“It looks like the buyers want to come out to the market and they are eager to find the right home and make an offer. Therefore, I expect the second quarter of this year to be easily ahead of last year in terms of sales activity. Pending contracts are implying that the closing activity in coming months will be quite solid.”

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3 Mistakes Sellers Often Make

Home owners can get emotional about their home when it’s time to sell. Here are a few mistakes sellers often make in letting emotions override logic during a transaction:

1. Being unrealistic about the home’s value.

Too often, what the seller believes their home is worth is not realistic. Despite tight inventories of homes for-sale in many markets, sellers still need to be careful not to get too greedy with their list price, say real estate professionals.

Home owners tend to get a much lower price when they overprice a home at the onset and then drop the price several times. The longer the home lingers on a market, the more likely it will receive a deeper discount, notes realtor.com®. McEnearney Associates, a real estate company in McLean, Va., found that to be true. Homes for sale in August 2013 sold within the first week on the market for an average of 2.08 percent above list price, while homes that stayed on the market four months sold for an average of 11.53 percent below the original price.

A reasonable price would be based on comparable properties that are selling for and the home’s appraised value. “No offers within a 30-day period means the price is too high,” real estate sales associate Djana Morris told The Washington Post.

Home Selling Tips

Staging to Sell

9 Real Estate Myths That Need Debunking

Tips for Pricing Your Home

2. Not making a better home presentation.

Another big mistake: Home owners who fail to spruce up their home’s interiors and exteriors. “At a minimum, home owners should conduct a thorough cleaning, haul out clutter, make sure the home is well-lit and fix any major aesthetic issues,” Chris Polychron, the president of the National Association of REALTORS®, said in a statement about findings from NAR’s 2015 Profile of Home Staging, a survey of more than 2,300 REALTORS® representing buyers and sellers.

Eighty-one percent of REALTORS® who represent buyers surveyed by NAR said that staged homes make it easier for their home buyers to visualize a property as their future home. Forty-six percent of buyer agents also reported that staging makes their buyers more willing to tour a home they viewed online, and 45 percent say that buyers tend to view the value of the home more positively if it is decorated to buyers’ tastes. 28 percent of agents said their buyers are even more willing to overlook other property faults if a home is staged.

3. Not being honest about the home’s history.

It can be tempting for some home owners to hide their home’s history and fail to disclose flaws. But agents need to remind their sellers that covering up serious flaws – such as foundation problems, leaky roofs, mold, or more – could come back to haunt them later. The buyer may uncover the flaws during the home inspection and may want to then back out of the deal or ask the seller to fix the problem then. If the issues aren’t discovered until after the sale, sellers may even find themselves in a legal battle later on. It’s important to remind sellers upfront about any potential issues with the home.

DAILY REAL ESTATE NEWS | MONDAY, APRIL 13, 2015

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Don’t Get Caught in the ‘Renter’s Trap’

Don’t Get Caught in the ‘Renter’s Trap’ | Keeping Current Matters

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) just 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 top 5 markets where renters have seen the highest increase in rents since 2009 are:

  • New York, NY (50.7%)
  • Seattle, WA (32.4%)
  • San Jose, CA (25.6%)
  • Denver, CO (24.1%)
  • St. Louis, MO (22.3%)

Homebuyers, who were able to purchase their home over the same five-year period and lock in their housing costs, were able to grow their net worth as home values have increased and their mortgage balances have gone down.

Know Your Options

Perhaps you have already saved enough to buy your first home. HousingWirereported that analysts at Nomura believe:

“It’s not that Millennials and other potential homebuyers aren’t qualified in terms of their credit scores or in how much they have saved for their down payment. 

It’s that they think they’re not qualified or they think that they don’t have a big enough down payment.” (emphasis added)

According to Freddie Mac:

“Depending on their credit history and other factors, many borrowers can expect to make a down payment of about 5 to 10%. And new 3% down financing options for qualified borrowers could mean a down payment as little as $6,000 for a $200,000 home.”

Bottom Line

Don’t get caught in the trap so many renters are currently in. If you are ready and willing to buy a home, find out if you are able. Have a professional help you determine if you are eligible to get a mortgage.

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Don’t Let Your “Luck” Run Out

Don’t Let Your “Luck” Run Out | Keeping Current Matters

The 30-year fixed mortgage interest rate is currently still below 4%. Many buyers may be on the fence as to whether to act now and purchase a new home, or wait until next year, believing they still have time to lock in a low rate.

If you look at what the experts are predicting over the course of the next 12 months, it may make the decision for you.

Predictions for 2016 2Q:

Even an increase of half a percentage point can put a dent in your family’s net worth.

Let’s look at it this way…

The monthly payment (principal & interest only) on a $250,000 home today, with the current 3.86% interest rate would be $1,173.

If we take that same home a year later, the Home Price Expectation Survey projects that prices will rise about 4.4% making that home cost $11,000 more at $261,000.

If we take Freddie Mac’s rate projection of 4.7%, the monthly mortgage payment climbs to $1,354.

Some buyers might not think that an extra $181 a month is that bad. But over the course of 30-year mortgage you have spent an additional $65,160 by waiting a year.

 

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Tired of home maintenance chores?

So are we. That’s why we love these easy-care features that free up your free time — and do it beautifully.

1.  Front Yard Patio

Patio in the front yard of a houseImage: Westover Landscape Design, Inc.

Lawns are classic suburbia; they’re also classic maintenance time-sucks. Good-looking patios, on the other hand, don’t need mowing, watering, or fertilizing. Ever. Be a trend-setter and put one in your front yard for you to enjoy and your neighbors to envy. A professionally installed brick or flagstone patio runs $15 to $18 per square foot.

2.  Vinyl Shake Siding

Vinyl shake siding on the exterior of a houseImage: Essex Home Improvements, Inc.

Vinyl shakes look as beautiful as real wood but they won’t crack, rot, fade, or need periodic staining and sealing. Even better: At $2 to $7 per square foot, installed, they’re about half the price of real wood shakes. Lots of colors available. Did we say that bugs don’t like them, either? Well, they don’t!

3.  Quartz Countertop

Low-maintenance quartz countertop in a kitchenImage: Bellingham from Cambria’s Waterstone Collection

Everyone seems to love granite — until it’s time to reseal it. You can get a look that’s just as gorgeous with engineered quartz countertops. Made with 95% quartz (one of the hardest known materials), a quartz countertop shrugs off stains, scratches, and germs (it’s antimicrobial). Cost is $40 to $100 per square foot, installed, about the same as granite. But — unlike granite — a quartz countertop is non-porous and never needs to be resealed. For that reason, quartz countertops are starting to rival granite as the preferred choice.

4.  Fiberglass Entry Door

Fiberglass entry door on a homeImage: Heckard’s Door

What looks like and feels as beautiful as wood, stains like wood, but never chips, warps, or cracks? Answer: fiberglass. All of which makes fiberglass an ideal material for high-style, low-fuss entry doors that mimic oak, mahogany, walnut, fir, and other woods. Average installed cost for this cool curb appeal upgrade: about $3,000.

5.  Shaker-Style Cabinets

Shaker-style white kitchen cabinets in homeImage: Dwelling Studio / All Around Joe Construction

Can style be low-maintenance and gorgeous, too? Of course! These Shaker-style kitchen cabinets, with their simple lines and absence of frills and trills, make cleanup a snap. They also fit with most any design, from traditional to modern. Order them with a tough factory finish that resists stains.

6.  Turf Grasses

Buffalo grass front lawnImage: Takao Nursery

If you love a lawn but hate the upkeep, go alternative. Lush, green turf grasses are beautiful and specially formulated so they’ll grow well in various climates. Once established, turf grasses, like the buffalo grass shown here, require very little watering or mowing, and virtually no fertilizers or pesticides.

7.  Direct-Vent Gas Fireplace

Cat next to direct vent fireplace in living room
Image: Spark Modern Fires

OK, you’re not Grizzly Adams. You don’t care for chopping firewood, cleaning a sooty hearth, or paying somebody to sweep the chimney every year. But you still like to curl up in front of a blazing fire. Solution: A gorgeous direct-vent gas fireplace ($2,000 to $5,000) burns clean, is energy-efficient, and throws off tons of ambiance.

8.  Manufactured Stone Veneer

Stone veneer on the exterior of a homeImage: Eldorado Stone

One of our favorite faux finishes, gorgeous manufactured stone veneer won’t split, crack, or fade. At about $18 per square foot installed, it isn’t cheap, but “Remodeling” magazine’s “Cost vs. Value Report” says you’ll recoup about 92% of your investment at resale — one of the highest returns in the report.

9.  Drought-Resistant Landscape Plants

Flowering azaleas in a home's yard
Image: Abby Farson Pratt

Azaleas like these are in the genus Rhododendron, a group of woody shrubs that grow in many different climates and have showy spring blossoms. Beautiful azaleas are tough and hardy once rooted into well-drained soil, making upkeep easy and reducing the need for water.

Houselogic – John Riha
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Bet on These Home Improvements in 2015

If you’re considering giving your home an upgrade this year, it can be overwhelming to choose what home features need an overhaul. Trends seem to change all the time, and the last thing you want is to spend money on costly improvements that will soon be out of date.

What’s Hot In Design?

21 Hot Housing Trends for 2015

Designers, Builders Reveal Hot Trends for 2015

The Next Big Home Feature Buyers Want?

Real estate brokerage Redfin recently analyzed home features that are most desirable to potential home buyers. First, they asked local real estate agents to take note to what features were cropping up the most on home tours. Then they searched for those design keywords and took note of what trends experienced the most growth in popularity in the last five years.

So what seven home improvements made their list of the safest bets?

  1. Quartz Countertops: For years it was all about the granite counters, but it appears that quartz is all the rage these days for buyers. According to Redfin, quartz has experienced a huge increase since 2012, due to its durability and overall buyer granite fatigue.
  2. Smart Homes: While Smart Home design is overall still a niche with buyers, it’s a phrase that has experienced an explosion in listing mentions since 2012. Redfin agents caution that buyers really need to choose a smart home system with the most up-to-date software since smart home technology is rapidly evolving.
  3. Stainless Steel Appliances: This trend is here to stay, and it has only increased in popularity since 2011. According to a Redfin agent, stainless steel is “the gold standard for kitchens these days” and it appears to be a very safe home improvement bet.
  4. Fire Pits: Buyers are still interested in turning their backyards into relaxing areas with multiple focal points that encourages interaction and socializing, and adding a fire pit remains a popular upgrade.
  5. Tasting Rooms: In the high-end and luxury market, the term “tasting” has slowly increased in listings over the last five years. In the past, buyers hid their wine cellars away from the main focal point of the house, but these days they’re requesting tasting rooms that are adjacent to the main socializing rooms of the house, such as the kitchen and living rooms.
  6. Outdoor Kitchens: Along with fire pits, outdoor kitchens and multi-use backyard areas have only gained in popularity, especially for high-end buyers who mention socializing in the home as a priority. According to Redfin, “Backyards are becoming places to lounge during the summer, with full kitchens, fireplaces and televisions.”
  7. Freestanding Tubs: The days of the space-saving combined shower and tub are over, at least for luxury buyers. Redfin reports that the term “freestanding tub” has increased dramatically since 2011, as buyers want a bathroom that’s more reminiscent of a spa.

And lastly, one trend that is seemingly on its way out? Exposed brick. According to Redfin, mentions of exposed brick in listings peaked back in 2013, and they caution that other than loft homes, buyers’ interest in exposed brick is waning.

Source: “7 Home Improvement Projects That Are a Safe Bet for 2015,” Redfin (Feb. 4, 2015)

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