According to the latest report from the US Census Bureau, more Americans chose purchasing a home over signing a lease to rent in the first quarter of 2017. This marks the first time since 2006 that the number of new homeowner households outpaced the number of new renter households. Of the 1.22 million new households that were formed in the first quarter, 854,000 were new-owner households making the jump straight to homeownership rather than renting first.
That means that the homeownership rate amongst new households was 70%!
This is huge news as the national homeownership rate is currently 63.6% and has only ever come close to this figure in the second quarter of 2004 when the homeownership rate reached an all-time high of 69.2%. A recent Wall Street Journal article pointed to the uptick in first-time homebuyers coming to market as a reason for the jump:
â"The return of first-time buyers is accelerating. In all they have accounted for 42% of buyers this year, up from 38% in 2015 and 31% at the lowest point during the recent housing cycle in 2011, according to Fannie Mae, which defines first-time buyers as anyone who hasn't owned a home in the past three years."
Ralph McLaughlin, Trulia's Chief Economist, had this to say about what a bump in new homeowner households could mean for the housing market:
"Strong renter household formation is one of the reasons why the homeownership rate has continued to drop since the onset of the housing crisis, so any sign this trend is reversing is something to take note of. We look forward to future releases of these data to determine whether this is a statistical blip or a trend."
As more and more potential first-time buyers realize their ability to buy a home without having to rent first, not only will the homeownership rate benefit, but so will the overall economy.
One of the many benefits of owning your own home is the freedom to find your 'furever' friend. By pointing out the aspects of your home that make it 'pet-friendly' in your listing, you'll attract these buyers rather than alienate the 61% of American households that have a pet! If you are one of the many homeowners looking to list your home for sale, how do you stand out to the millions of pet parents searching for their dream homes? Whether a dog person, a cat person, or someone who prefers the company of another pet species, 99% of pet owners say that they consider their animal to be family. When finding a home, 95% of animal owners believe it is important that a housing community allows animals. A recent study by the National Association of Realtors (NAR) revealed that there are many aspects of the home buying, selling and owning experience that have been greatly impacted by American's love for their pets. This should come as no surprise as $66.75 billion was spent on pets in the U.S in 2016, with $70 billion projected for 2017. NAR's President William E. Brown shed some light on the impact of pet owners and their home search,
"In 2016, 61 percent of U.S. households either have a pet or plan to get one in the future, so it is important to understand the unique needs and wants of animal owners when it comes to homeownership. REALTORSÂ® understand that when someone buys a home, they are buying it with the needs of their whole family in mind; ask pet owners, and they will enthusiastically agree that their animals are part of their family."
The Power of Pets When Choosing the Right Home
New home builders have actually begun installing retractable pet gates that tuck away neatly inside door jams as a highly requested feature in new homes to attract pet-parents, according to Builder.com. So, if you are a homeowner looking to sell in today's pet-friendly environment, point out the features of your home that will attract pet owners:
Americans love their pets and will look for pet-friendly features in the home they wish to buy, so take advantage of this knowledge by pointing out your home's ability to meet their needs.
Owning a home has great financial benefits, yet many continue renting! Today, let's look at the financial reasons why owning a home of your own has been a part of the American Dream for as long as America has existed. Zillow recently reported that:
"With Rents continuing to climb and interest rates staying low, many renters find themselves gazing over the homeownership fence and wondering if the grass really is greener. Leaving aside, for the moment, the difficulties of saving for a down payment, let's focus on the monthly expenses of owning a home: it turns out that renters currently paying the median rent in many markets could afford to buy a higher-quality property than the typical (read: median-valued) home without increasing their monthly expenses."
What proof exists that owning is financially better than renting?
1. The latest Rent Vs. Buy Report from Trulia pointed out the top 5 financial benefits of homeownership:
2. Studies have shown that a homeowner's net worth is 45x greater than that of a renter. 3. Just a few months ago, we explained that a family buying an average priced home at the beginning of 2017 could build more than $42,000 in family wealth over the next five years. 4. Some argue that renting eliminates the cost of taxes and home repairs, but every potential renter must realize that all the expenses the landlord incurs are already baked into the rent payment âalong with a profit margin!!
Owning a home has always been, and will always be, better from a financial standpoint than renting.
With housing prices appreciating at levels that far exceed historical norms, some are fearful that the market is heading for another bubble. To alleviate that fear, we just need to look back at the reasons that caused the bubble ten years ago. Last decade, demand for housing was artificially propped up because mortgage lending standards were way too lenient. People that were not qualified to purchase were able to attain a mortgage anyway. Prices began to skyrocket. This increase in demand caused homebuilders in many markets to overbuild. Eventually, the excess in new construction and the flooding of the market with distressed properties (foreclosures & short sales), caused by the lack of appropriate lending standards, led to the housing crash.
Where we are today...
1. If we look at lending standards based on the Mortgage Credit Availability Index released monthly by the Mortgage Bankers Association, we can see that, though standards have become more reasonable over the last few years, they are nowhere near where they were in the early 2000s.
2. If we look at new construction, we can see that builders are not "over building." Average annual housing starts in the first quarter of this year were not just below numbers recorded in 2002-2006, they are below starts going all the way back to 1980.
3. If we look at home prices, most homes haven't even returned to prices seen a decade ago. Trulia just released a report that explained:
"When it comes to the value of individual homes, the U.S. housing market has yet to recover. In fact, just 34.2% of homes nationally have seen their value surpass their pre-recession peak."
Mortgage lending standards are appropriate, new construction is below what is necessary and home prices haven't even recovered. It appears fears of a housing bubble are over-exaggerated.
The real estate market is moving more and more into a complete recovery. Home values are up. Home sales are up. Distressed sales (foreclosures and short sales) have fallen dramatically. It seems that 2017 will be the year that the housing market races forward again. However, there is one thing that may cause the industry to tap the brakes: a lack of housing inventory. While buyer demand looks like it will remain strong throughout the summer, supply is not keeping up. Here are the thoughts of a few industry experts on the subject:
Lawrence Yun, Chief Economist at NAR:
"Sellers are in the driver's seat this spring as the intense competition for the few homes for sale is forcing many buyers to be aggressive in their offers. Buyers are showing resiliency given the challenging conditions. However, at some point — and the sooner the better — price growth must ease to a healthier rate. Otherwise sales could slow if affordability conditions worsen."
Tom O'Grady, Pro Teck CEO
"The lack of inventory is very real and could have a severe impact on home sales in the months to come. Traditionally, a balanced market would have an MRI (Months Remaining Inventory) between six and 10 months. This month, only eight metros we track have MRIs over 10, compared to 27 last year and 48 two years ago—illustrating that this lack of inventory is not being driven by traditionally 'hot' markets, but is rather a broad-based, national phenomenon."
Ralph McLaughlin, Chief Economist at Trulia
"Nationally, housing inventory dropped to its lowest level on record in 2017 Q1. The number of homes on the market dropped for the eighth consecutive quarter, falling 5.1% over the past year."
"Tight housing inventory has been an important feature of the housing market at least since 2016. For-sale housing inventory, especially of starter homes, is currently at its lowest level in over ten years. If inventory continues to remain tight, home sales will likely decline from their 2016 levels. …all eyes are on housing inventory and whether or not it will meet the high demand."
If you are thinking of selling, now may be the time. Demand for your house will be strongest at a time when there is very little competition. That could lead to a quick sale for a really good price.
Homeownership will always be a part of the American Dream. There are advantages to owning your own home (educational, health, social) that far transcend any economic impact. However, we want to look at several of the financial advantages of homeownership in today's post.
1. Buying is Cheaper Than Renting
The results of the latest Rent vs. Buy Report from Trulia show 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 report reveals that:
"Interest rates have remained low, and even though home prices have appreciated around the country, they haven't greatly outpaced rental appreciationâ¦Nationally, rates would have to reach 9.1% for renting to be cheaper than buying. Rates haven't been that high since January of 1995, according to Freddie Mac."
2. Homeownership "Forces" You to Save
According to SavingAdvice.com, homeownership is a great way to save. Their advice is quite simple:
"Homeownership is a "forced" savings account because you own the home, you have no choice â that monthly housing cost has got to be paid no matter whatâ¦Homeownership can be an outstanding way to force yourself to be more frugal in the rest of your spending so that you can save and build equity in your home."
3. Homeownership Offers Several Tax Deductions
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 three:
Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts, and investment & market strategists about where they believe prices are headed over the next five years. They then average the projections of all 100+ experts into a single number. Over the next five years, home prices are expected to appreciate 3.22% per year on average and to grow by 17.3% cumulatively, according to Pulsenomics' most recent Home Price Expectation Survey.
Some are afraid that home values may have already peaked. However, we believe that purchasing a home now will prove to be a sound financial decision for years to come. As Warren Buffet said, "When others are greedy, be fearful. When others are fearful, be greedy."
Buying a home can be intimidating if you are not familiar with the terms used during the process. To start you on your path with confidence, we have compiled a list of some of the most common terms used when buying a home.
Freddie Mac has compiled a more exhaustive glossary of terms in their "My Home" section of their website.
Annual Percentage Rate (APR) - This is a broader measure of your cost for borrowing money. The APR includes the interest rate, points, broker fees and certain other credit charges a borrower is required to pay. Because these costs are rolled in, the APR is usually higher than your interest rate.
Appraisal - A professional analysis used to estimate the value of the property. This includes examples of sales of similar properties. This is a necessary step in getting your financing secured as it validates the home's worth to you and your lender.
Closing Costs - The costs to complete the real estate transaction. These costs are in addition to the price of the home and are paid at closing. They include points, taxes, title insurance, financing costs, items that must be prepaid or escrowed and other costs. Ask your lender for a complete list of closing cost items.
Credit Score - A number ranging from 300-850, that is based on an analysis of your credit history. Your credit score plays a significant role when securing a mortgage as it helps lenders determine the likelihood that you'll repay future debts. The higher your score, the better, but many buyers believe they need at least a 780 score to qualify when, in actuality, over 55% of approved loans had a score below 750.
Discount Points - A point equals 1% of your loan (1 point on a $200,000 loan = $2,000). You can pay points to buy down your mortgage interest rate. It's essentially an upfront interest payment to lock in a lower rate for your mortgage.
Down Payment - This is a portion of the cost of your home that you pay upfront to secure the purchase of the property. Down payments are typically 3 to 20% of the purchase price of the home. There are zero-down programs available through VA loans for Veterans, as well as USDA loans for rural areas of the country. Eighty percent of first-time buyers put less than 20% down last month.
Escrow - The holding of money or documents by a neutral third party before closing. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance.
Fixed-Rate Mortgages - A mortgage with an interest rate that does not change for the entire term of the loan. Fixed-rate mortgages are typically 15 or 30 years.
Home Inspection - A professional inspection of a home to determine the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation.
Mortgage Rate - The interest rate you pay to borrow money to buy your house. The lower the rate, the better. Interest rates for a 30-year fixed rate mortgage have hovered between 4 and 4.25% for most of 2017.
Pre-Approval Letter - A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you're a serious buyer. Having a pre-approval letter in hand while shopping for homes can help you move faster, and with greater confidence, in competitive markets.
Primary Mortgage Insurance (PMI) - If you make a down payment lower than 20% on your conventional loan, your lender will require PMI, typically at a rate of .51%. PMI serves as an added insurance policy that protects the lender if you are unable to pay your mortgage and can be cancelled from your payment once you reach 20% equity in your home. For more information on how PMI can impact your monthly housing cost, click here.
Real Estate Professional - An individual who provides services in buying and selling homes. Real estate professionals are there to help you through the confusing paperwork, to help you find your dream home, to negotiate any of the details that come up, and to help make sure that you know exactly what's going on in the housing market. Real estate professionals can refer you to local lenders or mortgage brokers along with other specialists that you will need throughout the home-buying process.
The best way to ensure that your home-buying process is a confident one is to find a real estate professional who will guide you through every aspect of the transaction with 'the heart of a teacher,' and who puts your family's needs first.
The National Association of Realtors (NAR) recently commented on President Trump's Tax Proposal stating that it would "hurt home-ownership". As we all know the current tax code is like a long confusing book that most people will never understand. So, in the spirit of our president's (whether you like it or not he is) effort to make the taxes easier for everyone I will keep this just as simple.
The proposed plan looks to cut the current seven brackets into just 4, and that's just the beginning. Any single person earning less than $25,000/year or couple earning less than $50,000/year won't owe any taxes at all. The other big change being that no business of any size will pay more than 15% of their business income taxes. Oh and no one I repeat, no one, pays more than 25% in income taxes. Not bad huh? So far seems like a win-win across the board. I mean those slick capitalists who've already mastered the scheme of working off the books and keeping their taxable income low will get to keep all their money! Oh and the business you're working for will now have some more scratch too. Maybe you can get ready to ask for that raise! What are these NAR guys and gals worried about? The answer: It's all about who's on first...
The NAR is worried about first time home-buyers. As they see it the proposed plan puts state and local tax incentives which help make home-ownership more affordable at risk. the NAR knows that first time homebuyers pump a great deal of money into the real estate market and they are afraid of seeing a reduction. Think about it, most first timers don't know what the hell they are afraid of seeing a reduction. Think about it, most first timers don't what the hell they are getting themselves into. They've spoken to the money changeers and got the green light, so now they want to buy! Meanwhile they don't care or realize that they really can't afford this place or that the proeprty value will most likely decrease by the time they want to move. This is the real problem, lack of information!
Unfortunately, we live in a world where Real Estate Agents are comparable to car mechanics. It's hard to find an honest one. If there were more honest agents out there who prided themselves on providing a service that creates trusting relationships instead of a bunch of money hungry sharks offering their "HELP", incentives would not be necessary in the first place. Most people in the middle and lower class have no problem working; it's the unfair wages and government sticking their hands in your pcket every chance they get that creates the tax cheats and wolves in sheep's clothing.
Sure we'll provide you with all these "incentives" to buy your home. This will create a sense of comfort as the high of saving money overcomes you, but what about the monstrous property taxes you knew nothing about, or the internal problems in the home your realtor "forgot" to tell you about? These are the things firt time homebuyers depend on their agent to school them on. What's the use of owning a home when your future encompasses a short road to bankruptcy?
I get where the NAR is coming from and their stance has some valid points, but putting more Americans hard earned money back into their pockets and allowing the opportunity for American business' to flourish again TRIMPS any incentive provided to first time home buyers. Long sotry short; get the money flowing and change the culture, then these "incentives" will become unnecessary. We have been trained to be dependent on your government for our own success when we should be looking at ourselves for that. If you are looking for an honest agency to help you find or sell your home or you want to work with a bunch of people who get the job done without sacrificing their integrity, call New York Real Estate Experts right now. As you can see we put the REAL in real estate.