93% of Americans Believe a Home Is a Better Investment Than Stocks
A recent Survey of Consumer Finances study released by the Federal Reserve reveals the net worth of homeowners is forty times greater than that of renters. If you’re wondering if homeownership is a good investment, the study clearly answers that question, and the answer is yes.
Do Americans believe a home is a better investment than stocks?
In a post on the Liberty Street Economics blog, the Federal Reserve Bank of New York notes that 93.3% of Americans believe buying a home is definitely or probably a better investment than buying stocks.
Here’s how the results break down:
Is Buying a Home or Buying Stocks the Better Investment?
The survey also shows a wide range of reasons why Americans feel that way (respondents were able to pick more than one answer):
Reasons Why a Home Is a Better Investment Than Stocks
Bottom Line
The data show how strongly Americans believe in homeownership as an investment. That belief is warranted. The Liberty Street Economics blog put it best by saying:
“Housing represents the largest asset owned by most households and is a major means of wealth accumulation, particularly for the middle class.”
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PHP Houses
142 W Lakeview Ave
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Over the past year, we’ve had plenty of opportunities to reflect on what we consider most important in our lives. The place we call home is one of the biggest things many of us are reevaluating. George Ratiu, Senior Economist at realtor.com, shares:
“The very nature of the pandemic, through the health implications, social distancing, and need to isolate, has really brought a central focus on the importance of home for most Americans…In a sense, it has elevated real estate markets as a centerpiece of our lives.”
For some, this has spurred an interest in making a move to a home that better suits our changing needs. In a recent study on today’s homebuyer preferences, the National Association of Home Builders (NAHB) states:
“When asked more specifically how the pandemic may have impacted their preference for home size…21% or about 1 out of every 5 buyers, do want a larger home now as a direct result of the health crisis, while another segment – 12% – would prefer a smaller one instead.”
While you might expect more time at home to lead to a need for more space, it’s interesting that a significant portion of homeowners actually want less. For those who own larger homes right now and have a desire to move, today’s housing market is full of opportunities. Danielle Hale, Chief Economist at realtor.com, explains:
“In a real estate market that is tipped in the favor of sellers, boomers and older homeowners are really the ones holding the cards…Those who are selling homes can use the profits to help them buy new ones.”
As a homeowner today, you likely have equity that can be put toward the purchase of your next home. With the equity growth homes have seen over the past year, you may have more than you think, which can help significantly as you make a move into your next home. According to a report from the National Association of Realtors (NAR):
“Home sellers cited that they sold their homes for a median of $66,000 more than they purchased it. Sellers 22 to 30 years gained the least at $33,400 in equity compared to sellers 66 to 74 years gained $100,000 in equity as they likely had lived in their homes for a longer period of time.”
Despite the benefits of growing home equity, some homeowners are still hesitant to move and could be considering remodeling or making changes to their current space instead. However, if you’ve thought about aging in place rather than downsizing, you may want to reconsider. The U.S. Census Bureaupoints out:
“Of the nation’s 115 million housing units, only 10% are ready to accommodate older populations.”
If your house is no longer the best fit for your evolving needs, it may be time to put your equity to work for you and downsize to the home you really want.
Bottom Line
Today’s housing market favors homeowners who are ready to sell their houses and make a move. If you’re thinking about downsizing this year, let’s connect to discuss your options in our local market.
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
4 Major Reasons Households in Forbearance Won’t Lose Their Homes to Foreclosure
There has been a lot of discussion as to what will happen once the 2.3 million households currently in forbearance no longer have the protection of the program. Some assume there could potentially be millions of foreclosures ready to hit the market. However, there are four reasons that won’t happen.
1. Almost 50% Leave Forbearance Already Caught Up on Payments
According to the Mortgage Bankers Association (MBA), data through March 28 show that 48.9% of homeowners who have already left the program were current on their mortgage payments when they exited.
6% made their monthly payments during their forbearance period
7% brought past due payments current
6% paid off their loan in full
This doesn’t mean that the over two million still in the plan will exit exactly the same way. It does, however, give us some insight into the possibilities.
2. The Banks Don’t Want the Houses Back
Banks have learned lessons from the crash of 2008. Lending institutions don’t want the headaches of managing foreclosed properties. This time, they’re working with homeowners to help them stay in their homes.
As an example, about 50% of all mortgages are backed by the Federal Housing Finance Agency (FHFA). In 2008, the FHFA offered 208,000 homeowners some form of Home Retention Action, which are options offered to a borrower who has the financial ability to enter a workout option and wants to stay in their home. Home retention options include temporary forbearances, repayment plans, loan modifications, or partial loan deferrals. These helped delinquent borrowers stay in their homes. Over the past year, the FHFA has offered that same protection to over one million homeowners.
Today, almost all lending institutions are working with their borrowers. The report from the MBA reveals that of those homeowners who have left forbearance,
5% have worked out a repayment plan with their lender
5% were granted a loan deferral where a borrower does not have to pay the lender interest or principal on a loan for an agreed-to period of time
9% were given a loan modification
3. There Is No Political Will to Foreclose on These Households
The government also seems determined not to let individuals or families lose their homes. Bloomberg recently reported:
“Mortgage companies could face penalties if they don’t take steps to prevent a deluge of foreclosures that threatens to hit the housing market later this year, a U.S. regulator said. The Consumer Financial Protection Bureau (CFPB) warning is tied to forbearance relief that’s allowed millions of borrowers to delay their mortgage payments due to the pandemic…mortgage servicers should start reaching out to affected homeowners now to advise them on ways they can modify their loans.”
The CFPB is proposing a new set of guidelines to ensure people will be able to retain their homes. Here are the major points in the proposal:
The proposed rule would provide a special pre-foreclosure review period that would generally prohibit servicers from starting foreclosure until after December 31, 2021.
The proposed rule would permit servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships based on the evaluation of an incomplete application.
The proposal rule wants temporary changes to certain required servicer communications to make sure borrowers receive key information about their options at the appropriate time.
A final decision is yet to be made, and some do question whether the CFPB has the power to delay foreclosures. The entire report can be found here: Protections for Borrowers Affected by the COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA), Regulation X.
4. If All Else Fails, Homeowners Will Sell Their Homes Before a Foreclosure
Homeowners have record levels of equity today. According to the latest CoreLogicHome Equity Report, the average equity of mortgaged homes is currently $204,000. In addition, 38% of homes do not have a mortgage, so the level of equity available to today’s homeowners is significant.
Just like the banks, homeowners learned a lesson from the housing crash too.
“In the same way that grandparents and great grandparents were shaped by the Great Depression, much of the public today remembers the 2006 mortgage meltdown and the foreclosures, unemployment, and bank failures it created. No one with any sense wants to repeat that experience…and it may explain why so much real estate equity remains mortgage-free.”
What does that mean to the forbearance situation? According to Black Knight:
“Just one in ten homeowners in forbearance has less than 10% equity in their home, typically the minimum necessary to be able to sell through traditional real estate channels to avoid foreclosure.”
Bottom Line
The reports of massive foreclosures about to come to the market are highly exaggerated. As Ivy Zelman, Chief Executive Officer of Zelman & Associates with roughly 30 years of experience covering housing and housing-related industries, recently proclaimed:
“The likelihood of us having a foreclosure crisis again is about zero percent.”
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
When thinking about selling, homeowners often feel they need to get their house ready with some remodeling to make it more appealing to buyers. However, with so many buyers competing for available homes right now, renovations may not be as vital as they would be in a more normal market. Here are two things to keep in mind if you’re thinking of selling this season.
1. There aren’t enough homes for sale right now.
A normal market has a 6-month supply of houses for sale, but today’s housing inventory sits far below that benchmark. According to the National Association of Realtors (NAR), there’s only a 1.9-month supply of homes available today. As a result, buyer competition is high and homes are only on the market for about 21 days, during which time many receive multiple offers from hopeful buyers.
In a competitive market that’s moving so quickly, it makes sense to sell your house when buyers are scooping homes up as fast as they’re being listed. Spending costly time and money on renovations before you sell might just mean you’ll miss your key window of opportunity. While certain repairs on your house may be important, your best move right now is to work with a real estate advisor to determine which improvements are truly necessary, and which ones are not likely to be deal-breakers for buyers.
Today, many buyers are more willing to take on home improvement projects themselves in order to get the home they’re after, even if it means putting in a little extra work. Home Advisor explains:
“When it comes to the number of home improvement projects completed, Gen Z homeowners are leading the pack, completing an average of 3.5 projects. Millennials closely follow Gen Z, taking on an average of 3.3 projects, followed by Gen X at 2.8 projects. Boomers completed an average of 2 projects, and the Silent Generation completed the fewest projects, on average, at 1.8 per household. Compared to 2019, millennials are spending 60% more on home improvement and doing on average 30% more projects.”
In this market, it may be wise to let future homeowners remodel the bathroom or the kitchen to make design decisions that are best for their specific taste and lifestyle. As a seller, your dollars and time might be better spent working on small cosmetic updates, like refreshing some paint and power washing the exterior. Instead of over-investing in your home with upgrades that the buyers may change anyway, work with a real estate professional to determine the key projects that will maximize your listing, without overdoing it.
2. Focus on getting a good return on your investment.
When planning any bigger projects to tackle, you and your real estate agent will want to discuss the potential return on your investment and if those projects are worth the cost. Some homes do need a kitchen or bathroom renovation, roof repairs, or other major work, but definitely not all of them. You might be surprised by how well your house could fair in today’s sellers’ market. Hanley Wood states:
“The 2020 Cost vs. Value report shows a predictable increase in costs for all 22 remodeling projects but a consistent dip in the perceived value of those projects at the time of home sale, as estimated by real-estate professionals in more than 100 metro areas across the U.S. This results in a slight downturn on the return on investment for nearly all projects relative to the trends we saw in last year’s report.”
Ideally, homeowners getting ready to move should try to avoid over-investing in big renovations if they won’t make that money back when they sell their house. According to the 2020 State of Home Spending report from Home Advisor:
“The average household spending on home services rose to $13,138, an increase over last year’s survey results, where homeowners who did projects spent $9,081 on average in 2019.”
Before you renovate, contact a local real estate professional to see if it’s the best course of action. You may find out that putting your house on the market as-is will help you sell quickly, and it may result in the best return on your investment. Every home is different, but a conversation with your agent is mission-critical to make sure you make the right moves when selling this season.
Bottom Line
We’re in a strong sellers’ market, and that means you have the leverage to sell your house on your terms. Let’s connect today to determine if renovating is really the best way to spend your time and money before you sell.
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
Multigenerational Housing Is Gaining Momentum [INFOGRAPHIC]
Some Highlights
If your house is feeling a little cramped with the addition of adult children or aging parents, it might be time to consider a move-up into a multigenerational home that better suits your changing needs.
With benefits that include a combined homebuying budget and shared caregiving duties, an increasing number of households are discovering the value of a multigenerational home.
With such high demand for houses today, now is a great time to sell so you can upgrade to a multigenerational home that may better suit your evolving needs.
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
A Fannie Maesurvey recently revealed some of the most highly-rated benefits of homeownership, which continue to be key drivers in today’s power-packed housing market. Here are the top four financial benefits of owning a home according to consumer respondents:
88% – a better chance of saving for retirement
87% – the best investment plan
85% – the chance to be better off financially
85% – the chance to build up wealth
Additional financial advantages of homeownership included in the survey are having the best overall tax situation and being able to live within your budget.
Does homeownership actually give you a better chance to build wealth?
No one can question a person’s unique feelings about the importance of homeownership. However, it’s fair to ask if the numbers justify homeownership as a financial asset.
Last fall, the Federal Reserve released the Survey of Consumer Finances, a report done every three years, with the latest edition covering through 2019. Their findings confirmed that homeownership is a clear financial benefit. The survey found that homeownershave forty times higher net worth than renters ($255,000 for homeowners compared to $6,300 for renters).
The difference in net worth between homeowners and renters has continued to grow. Here’s a graph showing the results of the last four Fed surveys:
The Gap in Net Worth is Widening
The above graph only includes data through 2019, but according to CoreLogic, the equity held by homeowners grew by $26,300 over the last twelve months alone. That means the gap between the net worth of homeowners and renters has probably widened even further over the last year.
Some might argue the difference in net worth may be due to homeowners normally having larger incomes than renters and therefore the ability to save more money. However, a study by First American shows homeowners have greater net worth than renters regardless of their income level. Here are the findings:
Net Worth Is Far Greater for Homeowners in Every Income Category
Others may think homeowners are older and that’s why they have a greater net worth. However, a Joint Center for Housing Studies ofHarvard Universityreport on homeowners and renters over the age of 65 reveals:
“The ability to build equity puts homeowners far ahead of renters in terms of household wealth…the median owner age 65 and over had home equity of $143,500 and net wealth of $319,200. By comparison, the net wealth of the same-age renter was just $6,700.”
Homeowners 65 and older have 47.6 times greater net worth than renters.
Bottom Line
The idea of homeownership as a direct way to build your net worth has met the test of time. Let’s connect if you’re ready to take 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
Latest Jobs Report: What Does It Mean for You & the Housing Market?
Last Friday, the Bureau of Labor Statistics released a very encouraging jobs report. The economy gained 916,000 jobs in March – well above expert projections of 650,000 to 675,000. The unemployment rate fell again and is now at 6%.
What does this mean for you?
Our lives are deeply impacted by our nation’s economy. The better the economy is doing overall, the better most individuals in the country will do as well. Here’s a look at what four experts told the Wall Street Journal after reviewing last week’s report.
Michael Feroli, JPMorgan Chase:
“The powerful tailwind of the reopening of economic activity appears to be gathering force; while the level of employment last month was still 8.4 million positions below that which prevailed before the pandemic, it is reasonable to expect that a majority of those lost jobs will be recouped in coming months.”
Mike Fratantoni, Mortgage Bankers Association:
“We fully expect that this pace of job gains will continue for months, and anticipate that the unemployment rate, now at 6%, will be well below 5% by the end of the year.”
Paul Ashworth, Capital Economics:
“With the vaccination program likely to reach critical mass within the next couple of months and the next round of fiscal stimulus providing a big boost, there is finally real light at the end of the tunnel.”
Jason Schenker, Prestige Economics:
“People are getting back to work and the vaccine isn’t just inoculating the population, it’s clearly inoculating the economy.”
What does this mean for residential real estate?
Today, the biggest challenge for homebuyers is the lack of homes currently for sale. With listing inventory down 52% from a year ago, bidding wars are skyrocketing. As a result, home prices are climbing.
One answer to this challenge is to build more homes to satisfy the demand. The latest jobs report gives hope for new housing construction, and therefore brings hope to buyers as well. Here’s what three industry economists said about the increase in construction jobs revealed in the report:
“Construction jobs boomed in March, one of the largest monthly gains ever. This raises the prospect for more home building and more inventory reaching the market in the upcoming months. The housing market has been hot with fast rising home prices but has been constrained by a lack of supply. By hiring more workers and building more homes, home prices will move to a manageable level to give more Americans a shot at ownership.”
“Great jobs report for a housing market in an inventory crisis. Residential construction building jobs increased 3.9% from pre-2020 recession peak in Feb. 2020. The construction industry remains a labor-intensive industry. We need more hammers at work to build more homes.”
“Good job numbers in March for residential construction. 37,000 gain from Feb to March. 3.03 million total employment for home builders and remodelers, and up 49,100 from Jan 2020.”
Bottom Line
An improving economy with a falling unemployment rate will benefit households across the country, as well as the overall housing market.
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
Don’t Sell on Your Own Just Because It’s a Sellers’ Market
In a sellers’ market, some homeowners might be tempted to try to sell their house on their own (known as For Sale By Owner, or FSBO) instead of working with a trusted real estate professional. When the inventory of homes for sale is as low as it is today, buyers are eager to snatch up virtually any house that comes to market. This makes it even more tempting to FSBO. As a result, some sellers think selling their house will be a breeze and see today’s market as an opportunity to FSBO. Let’s unpack why that’s a big mistake and may actually cost you more in the long run.
According to the Profile of Home Buyers and Sellers published by the National Association of Realtors (NAR), 41% of homeowners who tried to sell their house as a FSBO did so to avoid paying a commission or fee. In reality, even in a sellers’ market, selling on your own likely means you’ll net a lower profit than when you sell with the help of an agent.
The NAR report explains:
“FSBOs typically sell for less than the selling price of other homes; FSBO homes sold at a median of $217,900 in 2020 (up from $200,000 in 2019), and still far lower than the median selling price of all homes at $242,300. Agent-assisted homes sold for a median of $295,000…Sellers who began as a FSBO, then ended up working with an agent, received 98 percent of the asking price, but had to reduce their price the most before arriving at a final listing price.”
When the seller knew the buyer, that amount was even lower, coming in at $176,700 (See graph below):
Typical Sale Price FSBO vs Agent
That’s a lot of money to risk losing when you FSBO – far more than what you’d save on commission or other fees. Despite the advantages sellers have in today’s market, it’s still crucial to have the support of an expert to guide you through the process. Real estate professionals are trained negotiators with a ton of housing market insights that average homeowners may never have. An agent’s expertise can alleviate much of the stress of selling your house and help you close the best possible deal when you do.
Bottom Line
If you’re ready to sell your house this year and you’re considering doing so on your own, be sure to think through that decision carefully. Odds are, you stand to gain the most by working with a knowledgeable and experienced real estate agent. Let’s connect to discuss how a trusted advisor can help you, especially in today’s market.
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
Your Tax Refund and Stimulus Savings May Help You Achieve Homeownership This Year
If you’re planning to buy a home this year, saving for a down payment is one of the most important steps in the process. One of the best ways to jumpstart your savings is by starting with the help of your tax refund.
Using data from the Internal Revenue Service (IRS), it’s estimated that Americans can expect an average refund of $2,925 when filing their taxes this year. The map below shows the average anticipated tax refund by state:
Average Estimated Tax Refund
Thanks to programs from the Federal Housing Authority, Freddie Mac, and Fannie Mae, many first-time buyers can purchase a home with as little as 3% down. In addition, Veterans Affairs Loans allow many veterans to put 0% down. You may have heard the common myth that you need to put 20% down when you buy a home, but thankfully for most homebuyers, a 20% down payment isn’t actually required. It’s important to work with your real estate professional and your lender to understand all of your options.
How can your tax refund help?
If you’re a first-time buyer, your tax refund may cover more of a down payment than you realize.
If you take into account the median home sale price by state, the map below shows the percentage of a 3% down payment that’s covered by the average anticipated tax refund:
What Percentage of a 3% Down Payment Is Covered by the Average Tax Refund?
The darker the blue, the closer your tax refund gets you to homeownership when you qualify for one of the low down payment programs. Maybe this is the year to plan ahead and put your tax refund toward the down payment on a home.
Not enough money from your tax return?
A recent paper from the National Bureau of Economic Research found that, of the households that received a stimulus check last year, “One third report that they primarily saved the stimulus money.” If you had the opportunity to save your Economic Impact Payments, you may consider putting that money toward your down payment or closing costs as well. Your trusted real estate professional can also advise you on the down payment assistance programs available in your area.
Bottom Line
Saving for a down payment can seem like a daunting task, but it doesn’t have to be. This year, your tax refund and your stimulus savings could add up big when it comes to reaching your homeownership goals.
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
Buyer Competition Is Good News for Sellers [INFOGRAPHIC]
Some Highlights
With so many buyers looking for homes to purchase and so few houses available today, there’s a substantial increase in bidding wars, and homes are selling fast.
According to the latest Realtors Confidence Index Survey from the National Association of Realtors (NAR), on average, houses are receiving over four offers from buyers and they’re selling in less than three weeks.
If you’re ready to make a move, let’s connect today so you can sell your house while the market is in your favor.
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
