You are here

Ron's Blog

  • Buying is Now 37.7% Cheaper Than Renting in the US | Simplifying The Market

    Buying is Now 37.7% Cheaper Than Renting in the US

    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 updated numbers actually show that the range is an average of 17.4% less expensive in Honolulu (HI), all the way up to 53.2% less expensive in Miami & West Palm Beach (FL), and 37.7% nationwide!

    Other interesting findings in the report include:

    • Interest rates have remained low, and even though home prices have appreciated around the country, they haven’t greatly outpaced rental appreciation.
    • Home prices would have to appreciate by a range of over 23% in Honolulu (HI), up to over 45% in Ventura County (CA), to reach the tipping point of renting being less expensive than buying.
    • Nationally, rates would have to reach 9.1%, a 145% increase over today’s average of 3.7%, 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 out there who would like to evaluate your ability to buy this year, let’s get together to help you find your dream home.

  • Think You Should FSBO? 5 Reasons to Think Again! | Simplifying The Market

    Think You Should FSBO? 5 Reasons to Think Again!

    In today’s market, with home prices rising and a lack of inventory, some homeowners may consider trying to sell their home on their own, known in the industry as a For Sale by Owner (FSBO). There are several reasons why this might not be a good idea for the vast majority of sellers.

    Here are the top five reasons:

    1. Exposure to Prospective Buyers

    Recent studies have shown that 88% of buyers search online for a home. That is in comparison to only 21% looking at print newspaper ads. Most real estate agents have an internet strategy to promote the sale of your home. Do you? 

    2. Results Come from the Internet

    Where did buyers find the home they actually purchased?

    • 44% on the internet
    • 33% from a Real Estate Agent
    • 9% from a yard sign
    • 1% from newspapers

    The days of selling your house by just putting up a sign and putting it in the paper are long gone. Having a strong internet strategy is crucial. 

    3. There Are Too Many People to Negotiate With

    Here is a list of some of the people with whom you must be prepared to negotiate if you decide to For Sale By Owner:

    • The buyer who wants the best deal possible
    • The buyer’s agent who solely represents the best interest of the buyer
    • The buyer’s attorney (in some parts of the country)
    • The home inspection companies, which work for the buyer and will almost always find some problems with the house
    • The appraiser if there is a question of value

    4. FSBOing Has Become More And More Difficult

    The paperwork involved in selling and buying a home has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons that the percentage of people FSBOing has dropped from 19% to 8% over the last 20+ years.

    The 8% share represents the lowest recorded figure since NAR began collecting data in 1981.

    5. You Net More Money When Using an Agent

    Many homeowners believe that they will save the real estate commission by selling on their own. Realize that the main reason buyers look at FSBOs is because they also believe they can save the real estate agent’s commission. The seller and buyer can’t both save the commission.

    Studies have shown that the typical house sold by the homeowner sells for $210,000, while the typical house sold by an agent sells for $249,000. This doesn’t mean that an agent can get $39,000 more for your home, as studies have shown that people are more likely to FSBO in markets with lower price points. However, it does show that selling on your own might not make sense.

    Bottom Line

    Before you decide to take on the challenges of selling your house on your own, sit with a real estate professional in your marketplace and see what they have to offer.

  • The Cost of NOT Owning Your Home | Simplifying The Market

    The Cost of NOT Owning Your Home

    Owning a home has great financial benefits. Because of this, more and more experts are growing concerned about the ramifications of a falling homeownership rate. 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.

    The outcomes of a falling homeownership rate can be devastating. As explained by ApartmentList.com:

    “Our research indicates that not owning a home has a sizable financial cost, as renters miss out on low mortgage rates and are hit by higher rents.

    This phenomenon may exacerbate inequality in our society, as those wealthy enough to invest in real estate benefit from lower interest rates, whereas minorities and younger Americans, hit by rising rents and student debt, risk being locked out of homeownership.”

    What proof exists that owning is financially better than renting?

    1. A study published by the Joint Center of Housing Studies at Harvard University shows the financial benefits of homeownershipThe study mentions five major financial benefits:

    • Housing is typically the one leveraged investment available
    • You're paying for housing whether you own or rent
    • Owning is usually a form of “forced savings”
    • There are substantial tax benefits to owning
    • Owning is a hedge against inflation

    2. Studies have shown that homeowners have a net worth that is 45X greater than that of a renter.

    3. Just last month, we explained that a family buying an average priced home this past January could build more than $46,000 in family wealth over the next five years. 

    4. Some argue that renting eliminates the cost of taxes and home repairs. Every potential renter must realize that all the expenses the landlord incurs are baked into the rent payment already – along with a profit margin!!

    Bottom Line

    Owning a home has always been, and will always be better from a financial standpoint than renting.

     
  • Home Values: DEFINITELY NOT in Bubble Range!! | Simplifying The Market

    Home Values: DEFINITELY NOT in Bubble Range!!

    There are some industry pundits claiming that residential home values have risen too quickly and that current levels are on the verge of another housing bubble. It is easy to see how this thinking has taken form if we look at a graph of home prices from 2000 to today.

    Home Values: DEFINITELY NOT in Bubble Range!! | Simplifying The Market

    The graph definitely looks like a rollercoaster ride. And, as prices begin to reach 2006 levels again, it “seems logical” that the next part of the ride would be downhill. However, this graph includes the anomaly of the price bubble and the correction (the housing crash).

    What if the bubble & bust didn’t occur?

    Let’s assume that instead of the rise and fall in home prices that we saw last decade, we just had normal historic appreciation from 2000 to today. According to the 100+ experts that are surveyed for the Home Price Expectation Survey, normal annual appreciation for residential single family homes from 1987 to 1999 was 3.6%.

    Starting with the median home price in 2000, we added 3.6% to it each year since then. Here is that graph intermixed with the above graph.

    Home Values: DEFINITELY NOT in Bubble Range!! | Simplifying The Market
    What this shows us is that, had the bubble and crash not occurred and instead we just had normal annual appreciation over this period, prices would actually be greater than they are today.

    Bottom Line

    There is no reason for alarm as prices seem to be right in line with where they should be.

  • Don’t Get Caught in the Rental Trap! | Simplifying The Market

    Don’t Get Caught in the Rental Trap!

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

    Don’t Become Trapped

    Jonathan Smoke, Chief Economist at realtor.com, reported on what he calls a “Rental Affordability Crisis.” He warns that,

    “Low rental vacancies and a lack of new rental construction are pushing up rents, and we expect that they’ll outpace home price appreciation in the year ahead.”

    In the Joint Center for Housing Studies at Harvard University's 2015 Report on Rental Housing, they reported that 49% of rental households are cost-burdened, meaning they spend more than 30% of their income on housing. These households struggle to save for a rainy day and pay other bills, such as food and healthcare.

    It’s Cheaper to Buy Than Rent

    In Smoke’s article, he went on to say,

    “Housing is central to the health and well-being of our country and our local communities. In addition, this (rental affordability) crisis threatens the future value of owned housing, as the burdensome level of rents will trap more aspiring owners into a vicious financial cycle in which they cannot save and build a solid credit record to eventually buy a home.”

     “While more than 85% of markets have burdensome rents today, it’s perplexing that in more than 75% of the counties across the country, it is actually cheaper to buy than rent a home. So why aren’t those unhappy renters choosing to buy?”

    Know Your Options

    Perhaps you have already saved enough to buy your first home. HousingWire reported 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)

    Many first-time homebuyers who believe that they need a large down payment may be holding themselves back from their dream home. 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 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 could qualify for a mortgage now!

Pages

©2014 Ron Randolph. All Rights Reserved. Web Site by Tetrasys