- Owning your own home vs. renting may lead to some great options, such as locking in your monthly payments and having the freedom to customize your living space.
- Whether you rent or own, you have to cover someone’s mortgage costs. You may as well be doing so to build your own wealth, rather than that of your landlord.
- Renting and owning both have up-front fees when you sign your lease or close, respectively. Think about putting that money to work for you!
The U.S. Census Bureau recently released their 2019 Q2 Homeownership Report. Some began to see the sky falling, believing the report showed Americans may be stepping back from their belief in homeownership.
The national homeownership rate (Americans who owned vs. rented their primary residence) increased significantly during the housing boom, reaching its peak of 69.2% in 2004. The Census Bureau reported that the second quarter of 2019 ended with a homeownership rate of 64.1%, which is down from the 64.8% rate for the fourth quarter of 2018. Based on this news, some started to question the consumer’s belief in the idea of homeownership as a major part of the American Dream.
Everyone Calm Down…
It is true the homeownership rate did fall. However, if you look at the national rate over the last 35 years (1984-2019), you can see that the current homeownership rate has returned to historical norms. The 64.1% rate is equivalent to the rates in 1984 and 1994.
What Will the Future Bring?
Part of the reason the homeownership rate slipped is a lack of inventory available for purchase for first-time home buyers. The demand is there, but currently, the supply is not. It seems, however, that is about to change.
In a recent report, Ivy Zelman explained that builders have finally started to increase the number of homes they’re constructing at the lower-end price points:
“Robust growth in the entry-level price point of late should translate to a reacceleration in homeownership rates moving forward.”
Today, the homeownership rate sits at historic norms. In all probability, it will increase as more inventory becomes available. There is no reason for concern.
There’s no doubt that today’s housing market is changing, and everything we see right now indicates it is time to sell. Here’s a look at why selling now is likely to drive the greatest return on your largest investment.
Home values have been appreciating for several years now, growing at a strong, steady, and impressive pace. In fact, the average annual appreciation rate since 2012 has nearly doubled the average rate from the more normal market of the 1990s (think: pre-bubble).Appreciation, however, is projected to shift back toward normal, meaning home prices will likely keep climbing over the next few years, but they are not projected to continue to increase at such a high rate.
Here’s What That Means for Homeowners:
As noted in the latest Home Price Expectation Survey (HPES) powered by Pulsenomics, experts forecast an average annual appreciation rate closer to 3.2% over the next five years, which is more in line with a historically normal market (3.6%). The good news is, there’s still time to take advantage of the current strength of home prices by selling your house now.Looking at the projections as they stand today, 2019 is slated to drive the strongest appreciation as compared to the upcoming few years. With average home prices still on the rise, the pace at which they are predicted to continue increasing will likely soften by 2020.
If you’re thinking about selling your house, now is a great time to make your move. Don’t get stuck waiting until projected home price appreciation rates potentially re-accelerate again in 2023. You’ll likely earn the greatest return on your investment by selling now before the prices start to normalize next year.
Whether you’ve owned a home before, or you’re ready to jump into homeownership for the first time, there are always a lot of questions swirling around about what is truly required for a down payment, and how to best source down payment assistance. Let’s tackle these two today.
1. How much do you really need for a down payment?
There is a long-standing misconception about down payment requirements. A survey from Fannie Mae shows only 17% of consumers know the minimum options are actually between 1 – 5% of the purchase price and 40% don’t know how much they need at all.There are many mortgage loans available that require as little as 3% down for first-time buyers, and some ask for only 3.5% down from repeat buyers. There are even loans available for Veterans that provide 0% down payment options too.
We’ve mentioned recently that you don’t need to come up with a 20% down payment to buy, and we’ve also shared how quickly you can save for a 3% or 10% down payment, depending on where you live. If you’re planning to put down just 3%, the research shows it may be possible in most states to have enough saved for a down payment in less than a year. That puts homeownership in a much closer reach for many potential buyers, maybe even you!
2. How can I get help with my down payment?
Regardless of the loans available, many buyers still need assistance with a down payment. The great news is, there are a lot of ways to tap into down payment assistance options. Here are just a couple of them:
Assistance from Family Members
The National Association of Realtors (NAR) said, “a third of recent first-time buyers received down payment assistance from family members.” They also mentioned, “the average net worth of those aged 75 and over stands at $264,800…They just might offer the boost the next generation needs to become homeowners.”
That means one of the ways to find help with a down payment is to accept a gift from a family member. If this is an option for you, make sure you talk to your loan officer before you accept the money, to ensure you document the process the way it is required by your loan. This way, it will be received properly and you can still potentially qualify.
Down Payment Assistance Programs
The reality is, not everyone has a loved one or a family member who can provide help with a down payment. There are, however, more than 2,500 down payment assistance programs available (by local areas like city, county, or neighborhood), and some of them are even specifically for first-time buyers.
The gap, as mentioned in the same survey, is “only 23% of consumers are familiar with low down payment programs.”
That’s why it is so important to get familiar with these options by doing your homework before you plan to buy a home. Determine what is available in the area where you ultimately want to live, so you have all the details you need to take advantage of the down payment assistance option that is best for your family.
If buying a home is one of your long-term goals, you may be able to get there sooner than you think by tapping into one of the many down payment assistance programs available.
On his personal website, self-made millionaire David Bach makes a striking statement:
“Not prioritizing homeownership is the single biggest mistake millennials are making.”
He further stated, “Buying a home is an escalator to wealth.”
“Young adults in particular aren’t hopping on this escalator, and it’s a costly mistake…If millennials don’t buy a home, their chances of actually having any wealth in this country are little to none.”
He then elaborates on the game of homeownership:
“Start by crunching the numbers…actually do the math…This way, you’re really clear on your goals and you won’t just say to yourself, ‘I’ll never afford this!’
A good rule of thumb is to make sure your total monthly housing payment doesn’t consume more than 30 percent of your take-home pay.”
Bach concludes by saying,
“Oftentimes, buying your first home means you’re not buying your dream home…You’re just getting into the market.”
Whenever a well-respected millionaire gives investment advice, listeners usually clamor to hear it. This millionaire shares some simple and straightforward insights: “The fact is, you aren’t really in the game of building wealth until you own some real estate.”
Who is David Bach?
Bach is a self-made millionaire who has written nine consecutive New York Times bestsellers. His book, “The Automatic Millionaire,” spent 31 weeks on the New York Times bestseller list. He is one of the only business authors in history to have four books simultaneously on the New York Times, Wall Street Journal, BusinessWeek, and USA Today bestseller lists.
He has been a contributor to NBC’s Today Show, appearing more than 100 times, as well as a regular on ABC, CBS, Fox, CNBC, CNN, Yahoo, The View, and PBS. He has also been profiled in many major publications, including the New York Times, BusinessWeek, USA Today, People, Reader’s Digest, Time, Financial Times, Washington Post, Wall Street Journal, Working Woman, Glamour, Family Circle, Redbook, Huffington Post, Business Insider, Investors’ Business Daily, and Forbes.
- Existing Home Sales dropped 1.7% from May to a seasonally adjusted annual rate of 5.27 million in June.
- Low inventory levels are still a factor in the market. The current supply of homes for sale is at 4.4 months, which is less than the optimal 6-month supply.
- Median home prices were up 4.3% from June 2018, hitting $285,700. This marked the 88th consecutive month with year-over-year price gains.
We’ve experienced economic growth for almost a decade, which is the longest recovery in the nation’s history. Experts know a recession can’t be too far off, but when will this economic slowdown actually occur?
Pulsenomics just released a special report revealing that nearly 6 out of 10 of the 90 economists, investment strategists, and market analysts surveyed believe the next recession will occur by the end of next year. Here’s the breakdown:
- 9% believe a recession will occur this year
- 50% believe it will occur in 2020
- 35% believe it will occur in 2021
- 6% believe it will occur after 2021
When asked what would trigger the next recession, the three most common responses by those surveyed were:
- Trade Policy
- Stock Market Correction
- Geopolitical Crisis
How might the recession impact real estate?
Challenges in the housing and mortgage markets were major triggers of the last recession. However, a housing slowdown ranked #9 on the list of potential triggers for the next recession, behind such possibilities as fiscal policy and political gridlock.
As far as the impact the recession may have on home values, the experts surveyed indicated home prices would continue to appreciate over the next few years. They called for a 4.1% appreciation rate this year, 2.8% in 2020, and 2.5% in 2021.
On the same day, in the same survey, the same experts who forecasted a recession happening within the next 18 months also claimed housing will not be the trigger, and home values will still continue to appreciate.
As a homeowner, it’s always tempting to dream about the next big project you’re going to tackle. The possibilities are endless. Should I renovate? Should I refinance? Should I stay? Should I move? The list goes on and on.
In today’s housing market, it’s actually a great time to shift your thoughts toward selling your house and moving up into the home of your dreams. Here’s why:
Inventory is on the rise, but there’s still an overall shortage of houses for sale (less than a 6-month supply found in a more normal market), so homes are going under contract quickly. In fact, the National Association of Realtors (NAR) Realtors® Confidence Index Survey reports that right now homes are only staying on the market for an average of 27 days. That’s less than one month, an even more accelerated pace from the 36-day trend we saw last spring.The same report also indicates there are more interested buyers than active sellers today, which is one of the big factors driving home prices higher.
This power combination provides an ideal environment for sellers aiming to close a quick sale and earn a big return as we wrap up the summer season.
There’s still time to make a move before the school year starts and the fall weather sets in. Maybe it’s time to make a change. Let’s get together to determine if selling now is the right decision for your family.
Many of the questions currently surrounding the real estate industry focus on home prices and where they are heading. The most recent Home Price Expectation Survey (HPES) helps target these projected answers.
Here are the results from the Q2 2019 Survey:
- Home values will appreciate by 4.1% in 2019
- The average annual appreciation will be 3.2% over the next 5 years
- The cumulative appreciation will be 16.8% by 2023
- Even experts representing the most “bearish” quartile of the survey project a cumulative appreciation of over 6.7% by 2023
What does this mean for you?
A substantial portion of family wealth comes from home equity. As the value of a family’s home (an asset) increases, so does their equity.
Using the projections from the HPES, here is a look at the potential equity a family could earn over the next five years if they purchased a $250,000 home in January of 2019:Based on gains in home equity, their family wealth could increase by $42,000 over that five-year period.
If you don’t yet own a home, now may be the time to purchase. Owning or moving up to your dream home could allow you to ride the increase in equity of a growing asset.
Home Price Expectation survey – Every quarter, Pulsenomics surveys a distinguished panel of over 100 economists, investment strategists, and housing market analysts regarding their 5-year expectations for future home prices in the United States.
The current housing landscape presents greater home values, low interest rates, and high buyer demand. All of these factors point to the strong market forecasted to continue throughout the rest of the year.
There is, however, one thing that may cause the industry to tap the brakes: an overall lack of housing inventory. Buyer demand naturally increases during the summer months, but the current supply is not keeping up.
Here is a look at what a few industry experts have to say:
“Imbalance persists for mid-to-lower priced homes with solid demand and insufficient supply, which is consequently pushing up home prices.”
“Market conditions are ripe for increasing home sales with one glaring exception. The supply of homes for sale remains tight, keeping existing home sales below potential.”
“We’re not seeing as many new listings come up on the market…It was only 18 months ago that the number of homes for sale hit its lowest level in recorded history and sparked the fiercest competition among buyers we’ve ever seen.”
If you’re thinking of selling, now may be the time. Demand for your house will be strong during a period when there is very little competition, ideally leading to a quick sale and a great return on your investment.