Ron's Blog

  • The Truth About Housing Affordability

    The Truth About Housing Affordability | Simplifying The Market

    The Truth About Housing Affordability

    From a purely economic perspective, this is one of the best times in American history to buy a home. Black Night Financial Services discusses this in their most recent Monthly Mortgage Monitor.

    Here are two of the report’s revelations:

    1. The average U.S. home value increased by $13,500 from last year, but low interest rates have kept the monthly principal & interest payment needed to purchase a median-priced home almost equal to one year ago.
    2. Home affordability still remains favorable compared to long-term historic norms.

    The report explains:

    “Even though the value of the average home in the U.S. increased by about $13,500 over the last year, thanks to declining interest rates it actually costs almost exactly the same in principal and interest each month to purchase as it did this time last year.

    Even taking into account the fact that affordability can vary – sometimes significantly – across the country based upon the different rates of home price appreciation we’re seeing, that’s a pretty incredible balancing act between interest rates and home prices at the national level…

    Right now, it takes 20 percent of the median monthly income to cover monthly payments on the median-priced home, which is well below historical norms.”

    However, the report warns that affordability will be dramatically impacted by an increase in mortgage rates.

    “A half-point increase in interest rates would be equivalent to a $17,000 jump in the average home price, and bring that ratio to 21.5 percent. This increase is still below historical norms, but puts more pressure on homebuyers.”

    Bottom Line

    If you are ready and willing to purchase a home of your own, let's get together to find out if you are able to. Now is a great time to jump in.

  • How Long Do Families Stay in a Home?

    How Long Do Families Stay in a Home? | Simplifying The Market

    How Long Do Families Stay in a Home?

    The National Association of Realtors (NAR) keeps historic data on many aspects of homeownership. One of the data points that has changed dramatically is the median tenure of a family in a home. As the graph below shows, for over twenty years (1985-2008), the median tenure averaged exactly six years. However, since 2008, that average is almost nine years – an increase of almost 50%.

    How Long Do Families Stay in a Home? | Simplifying The Market

    Why the dramatic increase?

    The reasons for this change are plentiful. The top two reasons are:

    1. The fall in home prices during the housing crisis left many homeowners in a negative equity situation (where their home was worth less than the mortgage on the property).
    2. The uncertainty of the economy made some homeowners much more fiscally conservative about making a move.

    However, with home prices rising dramatically over the last several years, over 90% of homes with a mortgage are now in a positive equity situation with 70% of them having at least 20% equity.

    And, with the economy coming back and wages starting to increase, many homeowners are in a much better financial situation than they were just a few short years ago.

    What does this mean for housing?

    Many believe that a large portion of homeowners are not in a house that is best for their current family circumstances. They could be baby boomers living in an empty, four-bedroom colonial, or a millennial couple planning to start a family that currently lives in a one-bedroom condo.

    These homeowners are ready to make a move. Since the lack of housing inventory is a major challenge in the current housing market, this could be great news.

  • Buying is Now 37.7% Cheaper Than Renting in the US

    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!

    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

    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.

     

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