Tag: benefits owning a home

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Real Estate Market

The Difference in Net Worth Between Homeowners and Renters Is Widening

The Difference in Net Worth Between Homeowners and Renters Is Widening

Becoming financially secure is an important goal for many people today, but some don’t realize just how much homeownership can help them achieve that dream. A recent report, The Journey Toward Financial Freedom, surveys Americans about their perspective on financial wellness and their goals. It shows there may be a significant misconception about the role owning a home plays in building wealth:

“Home ownership is one of the indicators Americans say is least connected to financial health.”

Two major personal wealth goals – homeownership and net worth – work hand-in-hand. Below are just a few reasons why, if you’re looking for financial security, homeownership should be a top priority.

Homeownership Is an Important Cornerstone of Building Wealth

Every three years, the Federal Reserve releases the Survey of Consumer Finances which highlights the difference in wealth between homeowners and renters. The graph below shows the findings across the previous surveys including the latest data (2019), and the results are staggering:

Increasing Gap in Wealth

As the graph illustrates, the gap between homeowners and renters continues to widen. That’s because homeownership contributes massively to an individual’s overall net worth. Odeta Kushi, Deputy Chief Economist at First American, highlights this idea:

“. . . between 2016 and 2019, housing wealth was the single biggest contributor to the increase in net worth across all income groups . . . .”

When we look even closer at the most recent data from 2019, the average homeowner’s net worth is more than 40 times greater than that of the average renter (see graph below):

Graph
Average Household Net Worth

The gap exists in large part because homeowners build equity as their home appreciates in value and they pay off a portion of their mortgage each month. When you own your home, your monthly mortgage payment is, in essence, forced savings that come back to you when you sell your home or refinance. As a renter, you’ll never see a return on the money you pay out in rent every month.

If you’re ready to start building your net worth, the current real estate market offers several opportunities you should consider. For example, with today’s low mortgage rates, your purchasing power may be higher now than it has been in some time. That means there may be no better time than now to start working towards your homeownership goals – especially since rates are anticipated to rise in the coming months.

Bottom Line

Owning a home provides one of the strongest foundations for building individual wealth and lasting financial security. If you’re ready to start your path towards homeownership, let’s connect today.

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

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THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.
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Real Estate Market

If Housing Affordability Is About the Money, Don’t Forget This.

If Housing Affordability Is About the Money, Don’t Forget This.

There are many non-financial benefits of buying your own home. However, today’s headlines seem to be focusing primarily on the financial aspects of homeownership – specifically affordability. Many articles are making the claim that it’s not affordable to buy a home in today’s market, but that isn’t the case.

Today’s buyers are spending approximately 20% of their income on their monthly mortgage payments. According to The Essential Guide to Creating a Homebuying Budget from Freddie Mac, the 20% of income that purchasers are currently paying is well within the 28% guideline suggested:

“Most lenders agree that you should spend no more than 28% of your gross monthly income on a mortgage payment (including principal, interest, taxes and insurance).”

So why is there so much talk about challenges regarding affordability?

It’s Not That Homes Are Unaffordable – It’s That They’re Less Affordable.

Since home prices are rising, it’s true that homes are less affordable than they have been since the housing crash fifteen years ago. Headlines making these claims aren’t incorrect; they just don’t tell the whole story. To paint the full picture, you have to look at how today stacks up with historical data. A closer analysis of affordability going further back in time reveals that homes today are more affordable than any time from 1975 to 2005.

Despite that, the chatter about affordability is pushing some buyers to the sidelines. They don’t feel comfortable knowing someone else got a better deal a year ago.

However, Are Homes Really Less Affordable if We Consider Equity?

In a recent post, Odeta Kushi, Deputy Chief Economist at First American, offers a different take on the financial components of housing affordability. Kushi proposes we should at least consider the impact equity build-up has on the affordability equation, stating:

“For those trying to buy a home, rapid house price appreciation can be intimidating and makes the purchase more expensive. However, once the home is purchased, appreciation helps build equity in the home, and becomes a benefit rather than a cost. When accounting for the appreciation benefit in our rent versus own analysis, it was cheaper to own in every one of the top 50 markets.”

Let’s look at an example. In the above-mentioned post, Kushi examines the rent versus buy situation in Dallas, Texas. Kushi chose Dallas because home prices there sit near the median of the top 50 markets in the nation.

Kushi first calculates the monthly mortgage payment on a median-priced home with a 5% down payment and a mortgage rate of 3% (see chart below):

Monthly Cost of Owning a Home in Dallas

Kushi then takes the monthly cost and subtracts the appreciation the home had over the previous twelve months. The average house price in Dallas increased 17.5% in the second quarter of 2021 compared to last year (this is in line with the national pace). That equates to an equity benefit of approximately $3,550 each month if the pace remains the same (see chart below):

Monthly Cost After Appreciation

We can see the equity gained each month was greater than the monthly mortgage payment, resulting in a negative cost to own. The buyer could build their net worth by $1,830 each month – after paying their mortgage.

Kushi then compares the monthly cost of owning to the cost of renting (see chart below):

Difference in Monthly Cost vs. Median Rent

When adding equity build-up into the equation, the cost of renting is $3,140 more expensive than owning. Again, the First American analysis shows that it’s less expensive to own in each of the top 50 markets in the country when including the equity component.

Bottom Line

If you’re on the fence about whether to buy or rent right now, let’s connect so we can determine if the equity increase in our local market should impact your decision.

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

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THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.
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Buying a House

Key Questions To Ask Yourself Before Buying a Home

Key Questions To Ask Yourself Before Buying a Home

Sometimes it can feel like everyone has advice when it comes to buying a home. While your friends and loved ones may have your best interests in mind, they may also be missing crucial information about today’s housing market that you need to make your best decision.

Before you decide whether you’re ready to buy a home, you should know how to answer these three questions.

1. What’s Going on with Home Prices?

Home prices are one factor that directly impacts how much it will cost to buy a home and how much you stand to gain as a homeowner when prices appreciate.

The graph below shows just how much experts are forecasting prices to rise this year:

Home Prices Forecasts 2021

Continued price appreciation is great news for existing homeowners but can pose a significant challenge if you wait to buy. Using these forecasts, you can determine just how much waiting could cost you. If prices increase based on the average of all forecasts (12.46%), a median-priced home that cost $350,000 in January of 2021 will cost an additional $43,610 by the end of the year. What does this mean for you? Put simply, with home prices increasing, the longer you wait, the more it could cost you.

2. Are Today’s Low Mortgage Rates Going To Last?

Another significant factor that should inform your decision is mortgage interest rates. Today’s average rates remain close to record-lows. Much like prices, though, experts forecast rates will rise over the coming months, as the chart below shows:

Mortgage Rate Projections

Your monthly mortgage payment can be significantly impacted by even the slightest increase in mortgage rates, which makes the overall cost of the home greater over time when you wait.

3. Why Is Homeownership Important to You?

The final question is a personal one. Before deciding, you’ll need to understand your motivation to buy a home and why homeownership is an important goal for you. The financial benefits of owning a home are often easier to account for than the many emotional ones.

The 2021 National Homeownership Market Survey shows that six of the nine reasons Americans value homeownership are because of how it impacts them on a personal, aspirational level. The survey says homeownership provides:

  • Stability
  • Safety
  • A Sense of Accomplishment
  • A Life Milestone
  • A Stake in the Community
  • Personal Pride

The National Housing & Financial Capability Survey from NeighborWorks America also highlights the emotional benefits of homeownership:

Americans Agree Homeownership Offers Many Benefits

Clearly, there’s a value to homeownership beyond the many great financial opportunities it provides. It gives homeowners a sense of pride, safety, security, and accomplishment – which impacts their lives and how they feel daily.

Bottom Line

Homeownership is life-changing, and buying a home can positively impact you in so many ways. With any decision this big, it helps to have a trusted advisor by your side each step of the way. If you’re ready to begin your journey toward homeownership, let’s connect to discuss your options and begin your journey.

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

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THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.
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Real Estate Market

Demand for Vacation Homes Is Still Strong

Demand for Vacation Homes Is Still Strong

The pandemic created a tremendous interest in vacation homes across the country. Throughout the last year, many people purchased second homes as a safe getaway from the challenges of the health crisis. With many professionals working from home and many students taking classes remotely, it made sense to see a migration away from cities and into counties with more vacation destinations.

The 2021 Vacation Home Counties Report from the National Association of Realtors (NAR) shows that this increase in vacation home sales continues in 2021. The report examines sales in counties where “vacant seasonal, occasional, or recreational use housing account for at least 20% of the housing stock” and compares that data to the overall residential market.

Their findings show:

  • Vacation home sales rose by 16.4% to 310,600 in 2020, outpacing the 5.6% growth in total existing-home sales.
  • Vacation home sales are up 57.2% year-over-year during January-April 2021 compared to the 20% year-over-year change in total existing-home sales.
  • Home prices rose more in vacation home counties – the median existing price rose by 14.2% in vacation home counties, compared to 10.1% in non-vacation home counties.

This coincides with data released by Zelman & Associates on the increase in sales of second homes throughout the country last year.

As the data above shows, there is still high demand for second getaway homes in 2021 even as the pandemic winds down. While we may see a rise in second-home sellers as life returns to normal, ongoing low supply and high demand will continue to provide those sellers with a good return on their investment.

Bottom Line

If you’re one of the many people who purchased a vacation home during the pandemic, you’re likely wondering what this means for you. If you’re considering selling that home as life returns to normal, you have options. There are still plenty of buyers in the market. If, on the other hand, you want to keep your second home, enjoy it! Current market conditions show that it’s a good ongoing investment.

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

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THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE
Categories
Buying a House

Owning a Home Has Distinct Financial Benefits Over Renting [INFOGRAPHIC]

Owning a Home Has Distinct Financial Benefits Over Renting [INFOGRAPHIC]

Some Highlights

  • When you rent, you build your landlord’s wealth, your monthly payment depends on ever-rising rents, and you don’t benefit from home price appreciation.
  • On the other hand, when you own your home, you build your own wealth, your monthly payment is locked in, and you benefit directly from home price appreciation.
  • If you’re feeling the challenges of a competitive market, remember that homeownership is a long-term game. Persevering today will lead to financial rewards in the future.

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

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Real Estate Market

6 Reasons to Celebrate National Homeownership Month

6 Reasons to Celebrate National Homeownership Month | MyKCM

Our homes are so much more than the houses we live in. For many, they’ve also become our workplaces, schools for our children, and safe harbors in which we’ve weathered the toughest moments of a global pandemic. Today, 65.6% of Americans call their homes their own, a rate that has risen to its highest point in 8 years.

As National Homeownership Month kicks off this June, homeowners have every reason to celebrate. A survey by Gallup just ranked real estate as the best investment you can make for the eighth year in a row. However, unlike other investment options, the benefits of owning a home aren’t purely financial. Here are the top ways Americans are winning by owning a home.

Non-Financial Benefits:

1. Civic Participation: Owning a home is owning a part of your neighborhood. Homeowners have a stronger connection to their neighborhoods and are more committed to volunteer work and other ways to get involved.

2. Pride of Ownership: Owning a home is having a space that is uniquely yours. You can customize it to your personal liking and make it reflect your personality and values.

3. A Safe Space: Owning a home gives you a sense of security and privacy – two things that have become even more valuable as we’ve tackled the challenges of the recent health crisis.

Financial Benefits:

1. Forced Savings: Owning a home builds equity. Your equity grows with each payment you make toward your mortgage. This form of forced savings can be used down the road to help you accomplish your biggest financial goals.

2. Appreciation: Owning a home is making an investment that steadily gains value, and experts project home values will continue to rise in the years to come.

3. Stability: Owning a home means having better control over your future housing payments. Over the years, a mortgage stays relatively steady, but rent costs continue to rise.

Bottom Line

If you own your home, take time this June to celebrate the ways homeownership has added value to your life. If you hope to become a homeowner this year, let’s connect today to take the first steps toward achieving your goal.

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

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THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE
Categories
Buying a House

Why Waiting to Buy a Home Could Cost You a Small Fortune


Why Waiting to Buy a Home Could Cost You a Small Fortune

Many people are sitting on the fence trying to decide if now’s the time to buy a home. Some are renters who have a strong desire to become homeowners but are unsure if buying right now makes sense. Others may be homeowners who are realizing that their current home no longer fits their changing needs.

To determine if they should buy now or wait another year, they both need to ask two simple questions:

  1. Do I think home values will be higher a year from now?
  2. Do I think mortgage rates will be higher a year from now?

Let’s shed some light on the answers to these questions.

Where will home prices be a year from now?

If you average the most recent projections from the major industry forecasters, the expectation is home prices will increase by 7.7%. Let’s take a house that’s valued today at $325,000 as an example.

If the buyer makes a 10% down payment ($32,500), they’ll end up borrowing $292,500 for their mortgage. Applying the projected rate of home price appreciation, that same house will cost $350,025 next year. With a 10% down payment ($35,003), they’d then have to borrow $315,022.

Therefore, as a result of rising home prices alone, a prospective buyer will have to put down an additional $2,503 and borrow an additional $22,523 just for waiting a year to make their move.

Where will mortgage rates be a year from now?

Today, mortgage rates are hovering around 3%. However, most experts believe they’ll rise as the economy continues to recover. Any increase in the mortgage rate will also increase a purchaser’s cost. Here are the forecasts for the first quarter of 2022 from four major entities:

The projections average out to 3.6% among these four forecasts, a jump up from where they are today.

What does it mean to you if home values and mortgage rates increase?

A buyer will pay a lot more in mortgage payments each month if both of these variables increase. Assuming a buyer purchases a $325,000 home this year with a 30-year fixed-rate loan at 3% after making a 10% down payment, their monthly principal and interest payment would be $1,233.

That same home one year from now could be $350,025, and the mortgage rate could be 3.6% (based on the industry forecasts mentioned above). That monthly principal and interest payment, after putting down 10%, totals $1,432.

The difference in the monthly mortgage payment would be $199. That’s $2,388 more per year and $71,640 over the life of the loan.

Add to that the approximately $25,000 a house with a similar value would build in home equity this year as a result of home price appreciation, and the total net worth increase a purchaser could gain by buying this year is nearly $100,000. That’s a small fortune.

Bottom Line

When asking if they should buy a home, many potential buyers think of the nonfinancial benefits of owning a home. When asking when to buy, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year.

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

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THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE.
Categories
Real Estate Market

Americans Find the Nonfinancial Benefits of Homeownership Most Valuable

Americans Find the Nonfinancial Benefits of Homeownership Most Valuable

Homeownership is a foundational part of the American Dream. As we look back on more than a year of sheltering in our homes, having a place of our own is more important than ever. While financial benefits are always a key aspect of homeownership, today, homeowners rank the nonfinancial and personal benefits with even higher value.

Recently, two national surveys revealed the reasons homeownership is such an important part of life. The top three personal benefits of homeownership noted by respondents in Unison’s 2021 report on The State of the American Homeowner are:

  • 91% – feel secure, stable, or successful owning a home
  • 70% – feel emotionally attached to the homes that have kept them safe over the past year
  • 51% – call homeownership a “key part of their life”

These sentiments were supported by the most recent National Housing Survey from Fannie Mae, which also shows that the top three reasons Americans value homeownership have nothing to do with money. Those surveyed were given a list of feelings and accomplishments that are associated with or impacted by where we live. They were then asked, “To achieve this, are you better off owning or better off renting?” Here are the top three points from the list that respondents said homeownership could help them achieve:

  • 91% – control over what you do with your living space
  • 90% – a sense of privacy and security
  • 89% – a good place for your family to raise your children

Other nonfinancial advantages of homeownership revealed by the survey include feeling engaged in a community, having flexibility in future decisions, and experiencing less stress.

Bottom Line

Financial and nonfinancial benefits are a key component to the value of homeownership, but the nonfinancial side is most valued after a year full of pandemic-driven challenges. Let’s connect today if you’re ready to take the first steps toward becoming a homeowner.

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

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THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE.
Categories
Real Estate Market

What Is the #1 Financial Benefit of Homeownership?

What Is the #1 Financial Benefit of Homeownership?

There are many financial and non-financial benefits of homeownership, and the greatest financial one is wealth creation. Homeownership has always been the first rung on the ladder that leads to forming household wealth. As Freddie Mac explains:

“Homeownership has cemented its role as part of the American Dream, providing families with a place that is their own and an avenue for building wealth over time. This ‘wealth’ is built, in large part, through the creation of equity…Building equity through your monthly principal payments and appreciation is a critical part of homeownership that can help you create financial stability.”

Odeta Kushi, Deputy Chief Economist at First American, also notes:

“The wealth-building power of homeownership shows that home is not only where your heart is, but also where your wealth is…For the majority of households that transition into homeownership, the most recent data reinforces that housing is one of the biggest positive drivers of wealth creation.”

Last week, CoreLogic released their latest Homeowner Equity Insights Report, which reveals the surge in wealth created over the last twelve months through increased home equity. The report makes five key points:

  1. Roughly 38% of all homes are mortgage-free
  2. The average equity gain of mortgaged homes in the last year was $26,300
  3. The current average equity of mortgaged homes is greater than $200,000
  4. There was a 16.9% increase in total homeowner equity
  5. Total homeowner equity reached over $1.5 trillion

Here’s a map that shows the equity gains by state:

Equity Increasing Throughout the Country

Increasing equity is giving homeowners the power to better manage the challenges of the pandemic, especially for those spending more time at home. In the report, Frank Nothaft, Chief Economist for CoreLogic, explains:

“This equity growth has enabled many families to finance home remodeling, such as adding an office or study, further contributing to last year’s record level in home improvement spending.”

The financial advantage homeowners have has not gone unnoticed. In the same report, Frank Martell, President and CEO of CoreLogic, states:

“This growing bank of personal wealth that homeownership affords was noticed by many but in particular for first-time buyers who want a piece of the cake.”

Increasing wealth benefits more than just homeowners.

Last year, the Rosen Consulting Group released a report outlining the benefits of homeownership. In that report, they explained what an increase in net worth – which they call the “wealth effect” – means to the economy:

“In economic literature, the wealth effect is a term used to describe the fact that individuals have a tendency to increase their spending habits when their actual or perceived wealth increases. For homeowners, the latent savings achieved by building equity in their home and the growth in home values over time both contribute to increased net worth. Through the wealth effect, this in turn translates to households having a greater ability and willingness to spend money across a wide range of other types of goods and services that spur business activity and provide a positive multiplier effect that creates jobs and income throughout the economy.”

Bottom Line

Homeownership builds wealth through equity, and this creates a positive impact for homeowners and their communities. Let’s connect today if you’re ready to invest in a home of your own.

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

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Categories
Buying a House

Millennials: Is It Time to Buy a Bigger Home?

Millennials: Is It Time to Buy a Bigger Home?

In today’s housing market, all eyes are on millennials. Not only are millennials the largest generation, but they’re also currently between 25 and 40 years old. These are often considered prime homebuying years when many people begin to form their own households and invest in real estate. If you’re like many millennials who are spending much more time at home these days, you may have a growing need for more space or upgraded features, making moving more desirable than ever.

For those millennials who already own a home, there’s a great opportunity to move up in 2021. Danielle Hale, Chief Economist at realtor.com, explains:

“Older millennials will be trade-up buyers with many having owned their first homes long enough to see substantial equity gains.”

Even if you bought a home sometime in the last few years, you may have more equity than you realize, and that’s a big factor to consider when you’re thinking about moving. According to the Homeowner Equity Insights Report from CoreLogic:

“In the third quarter of 2020, the average homeowner gained approximately $17,000 in equity during the past year. This marks the largest average equity gain since the first quarter of 2014.”

Growing equity can be the driver you’re looking for to fund your next move, especially if what you need in a home is changing right now. As equity builds over time, it can be put toward the down payment on your next home.

In addition to equity gains, today’s housing market affordability is powered by record-low mortgage rates, so moving at a time when you can get more for your money may be more realistic than you think.

Bottom Line

If you’re a millennial thinking about moving this year, you’re not alone. Let’s connect to shed light on the equity you have in your current home and the opportunities it can create.

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

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THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE