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The Net Worth of a Homeowner is 44x Greater Than A Renter!

Homeowners Net WorthEvery three years, the Federal Reserve conducts their Survey of Consumer Finances in which they collect data across all economic and social groups. Their latest survey data, covering 2013-2016 was recently released.

The study revealed that the median net worth of a homeowner was $231,400 – a 15% increase since 2013. At the same time, the median net worth of renters decreased by 5% ($5,200 today compared to $5,500 in 2013).

These numbers reveal that the net worth of a homeowner is over 44 times greater than that of a renter.

Owning a home is a great way to build family wealth

As we’ve said before, simply put, homeownership is a form of ‘forced savings.’ Every time you pay your mortgage, you are contributing to your net worth by increasing the equity in your home.

That is why, for the fifth year in a row, Gallup reported that Americans picked real estate as the best long-term investment. This year’s results showed that 34% of Americans chose real estate, followed by stocks at 26% and then gold, savings accounts/CDs, or bonds.

Greater equity in your home gives you options

If you want to find out how you can use the increased equity in your home to move to a home that better fits your current lifestyle, let’s get together to discuss the process. Contact us today!

 

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    Massachusetts Real Estate: August 2018 Market Overview

    "With prices continuing to creep up, buyers are taking a stand and refusing to over pay for their largest investment." reports Linda O'Koniewski, CEO of Leading Edge Real Estate. "Sellers who are on the fence or who are waiting until the Fall to list their homes should consider listing now to avoid the influx of inventory expected after Labor Day and to ensure the highest possible sale price. With news that interest rates will stay steady in the next term, buyers are eager to get into the market before they pop."

     

    Massachusetts Real Estate July 2018


    Thinking of selling your home? Contact The Ternullo Real Estate Team today and learn how we can help!

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      Buying Is Now 26.3% Cheaper Than Renting in the US

      Happy Home BuyersThe 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 98 of the 100 largest metro areas in the United States.

      In the six years that Trulia has conducted this study, this is the first time that it was cheaper to rent than buy in any of the metropolitan areas.

      It’s no surprise, however, that those two metros are San Jose and San Francisco, CA, where median home prices have jumped to over $1 million dollars this year. Home values in San Jose have risen 29% in the last year, while rents have remained relatively unchanged.

      For the 98 metros where homeownership wins out, 97 of them show a double-digit advantage when buying. The range is an average of 2.0% less expensive in Honolulu (HI), all the way up to 48.9% in Detroit (MI), and 26.3% nationwide!

      Below is a map of the 100 metros that were studied. The darker the blue dot on the metro, the cheaper it is to buy there.

      The Cost of Renting versus Owning a Home

      In order to calculate the true cost of renting vs. buying, Trulia includes all assumed renting costs, including one-time costs (like security deposits), and compares them to the monthly costs of owning a home (insurance, mortgage payments, taxes, and maintenance) including one-time costs (down payments, closing costs, sale proceeds). They also assume that households stay in their home for seven years, put down a 20% down payment, and take out a 30-year fixed rate mortgage. The full methodology is included with the study results here.

      Below is a chart created with the data from the last six years of the study, showing the impact of the median home price, rental price, and 30-year fixed rate interest rate used to calculate the ‘cheaper to buy’ metric.

      Buying Remains Cheaper than Renting in the US

      In 2016, when buying was 41.3% less expensive than renting, the average mortgage rate was the driving force behind the difference. Rates this year are the highest they have been in six years which has narrowed the gap, all while home price appreciation has also been driven up by a lack of homes for sale.

      Cheryl Young, Trulia’s Chief Economist, had this to say, “One point deserves emphasizing: The ultra-costly San Francisco Bay Area is not a harbinger for the nation as a whole. While renting may outweigh buying in San Jose and San Francisco, it is unlikely that renting will tip the scales nationally anytime soon.”

      Bottom Line

      Homeownership provides many benefits beyond the financial ones. If you are one of the many renters out there who would like to evaluate your ability to buy this year, contact the Ternullo Real Estate team today and let’s get together to find your dream home.

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      Parents Say Kids' Opinions Matter Big When Buying a Home

      A recent survey conducted by Harris Poll and released by SunTrust Mortgage found that “55% of homeowners with a child under the age of 18 at the time when they purchased their home said that the opinion of their offspring played a major role in their home buying decision.”

      When the results were broken down by the parent’s age, millennials (those 18-36) led the way with 74% of homeowners saying that their child’s opinion was a factor in choosing which home to buy. Eighty-three percent of renters believe that their child’s opinion would be a deciding factor when looking to purchase a home.

      So what features in a home are most important to kids?

      Parents Say Kids Opinions Matter Big When Buying a Home | MyKCM

      Coming in at 57%, it should come as no surprise that gaining their own bedrooms was the top most-desirable feature of any home for kids, followed by a large back yard to play in at 34%.

      Todd Chamberlain, Head of Mortgage Banking at SunTrustexplained the reasoning behind the survey,

      “As a parent of two kids, I know from experience that including children in the home buying process is not only fun for the whole family, but also educational for our homebuyers of tomorrow.” 

      Bottom Line

      If you’re thinking about selling your home this year, make sure to highlight all the kid-friendly features your home has to offer so that you can sway the real decision makers.

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      Millennials Are Skipping Starter Homes for Their Dream Homes

      Millennials Are Skipping Starter Homes for Their Dream Homes

      A new trend has begun to emerge. With home prices skyrocketing in the starter home category, many first-time homebuyers are skipping the traditional starter homes and moving right into their dream homes.

      What’s a Starter Home?

      According to the National Association of Realtors (NAR), simply put, a starter home is a one or two-bedroom home (sometimes even a small, three bedroom). “Prices vary widely by market but starters on average cost $150,000 to $250,000 while trade-up and premium homes cost upwards of $300,000.”

      Finding Their Forever Homes Now

      A recent CNBC article revealed that there are many factors that delayed older millennials (ages 25-35) from buying a home earlier in their lives. The aftereffects of the Great Recession teaming up with larger education costs forced many to either remain living in their parent’s homes or to rent.

      With the economy continuing to improve, many millennials have been able to break into better-paying jobs which has helped spur down payment savings. As the dream of homeownership comes closer to reality, many millennials are saving for their forever homes.

      According to the latest statistics from NAR, 30% of millennials bought homes for $300,000 or more this year (up from 14% in 2013). Diane Swonk, Chief Economist at Grant Thornton weighed in saying, “They rented for longer. Now they’re going to where they want to stay.”

      More and more millennials are settling down, getting married, and starting families, which is a huge factor driving them to look for larger homes.

      Increased competition in the starter home market has also been a driving force in waiting to afford their dream homes. Inventory in the starter home market is down 14.2% from last year, according to research from Trulia. This has driven prices up and has led to bidding wars.

      Many first-time buyers who were originally looking for starter homes are realizing that for just a little bit more of an investment, they could afford trade-up or premium homes instead.

      Bottom Line

      If you plan on purchasing your first home this year, let’s get together to determine how much house you can afford. You may be pleasantly surprised.

      Will Home Prices Fall as Mortgage Rates Rise?

      Mortgage interest rates have increased by more than half of a point since the beginning of the year. They are projected to increase by an additional half of a point by year’s end. Because of this increase in rates, some are guessing that home prices will depreciate.

      However, some prominent experts in the housing industry doubt that home values will be negatively impacted by the rise in rates.

      Mark Fleming, First American’s Chief Economist: 

      “Understanding the resiliency of the housing market in a rising mortgage rate environment puts the likely rise in mortgage rates into perspective – they are unlikely to materially impact the housing market… 

      The driving force behind the increase are healthy economic conditions…The healthy economy encourages more homeownership demand and spurs household income growth, which increases consumer house-buying power. Mortgage rates are on the rise because of a stronger economy and our housing market is well positioned to adapt.”

      Terry Loebs, Founder of Pulsenomics:

      “Constrained home supply, persistent demand, very low unemployment, and steady economic growth have given a jolt to the near-term outlook for U.S. home prices. These conditions are overshadowing concerns that mortgage rate increases expected this year might quash the appetite of prospective home buyers.”

      Laurie Goodman, Codirector of the Housing Finance Policy Center at the Urban Institute:

      “Higher interest rates are generally positive for home prices, despite decreasing affordability…There were only three periods of prolonged higher rates in 1994, 2000, and the ‘taper tantrum’ in 2013. In each period, home price appreciation was robust.”

      Industry reports are also calling for substantial home price appreciation this year. Here are three examples:

      • The Home Price Expectation Survey says that prices will appreciate by 5.8% this year.
      • The Freddie Mac Outlook Report is looking for home prices to appreciate by around 7% in 2018.
      • The CoreLogic HPI Forecast indicates that home prices will increase by 5.2% on a year-over-year basis.

      Bottom Line

      As Freddie Mac reported earlier this year in their Insights Report“Nowhere to go but up? How increasing mortgage rates could affect housing,”

      “As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”

      5 Reasons You Shouldn't For Sale By Owner

      Selling Your HomeIn 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 Purchasers

      Recent studies have shown that 95% of buyers search online for a home. That is in comparison to only  17% 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?

      • 49% on the internet
      • 31% from a Real Estate Agent
      • 7% 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

      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.

      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.

      A study by Collateral Analytics revealed that FSBOs don’t actually save anything, and in some cases,  may be costing themselves more, by not listing with an agent. One of the main reasons for the price  difference at the time of sale is:

      “Properties listed with a broker that is a member of the local MLS will be listed online with all other participating broker websites, marketing the home to a much larger buyer population. And those MLS properties generally offer compensation to agents who represent buyers, incentivizing them to show and sell the property and again potentially enlarging the buyer pool.”

      If more buyers see a home, the greater the chances are that there could be a bidding war for the property. The study showed that the difference in price between comparable homes of size and location is currently at an average of 6%.

      Why would you choose to list on your own and manage the entire transaction when you can hire an agent and not have to pay anything more?

      Bottom Line

      Before you decide to take on the challenges of selling your house on your own, let’s get together and discuss your needs.

      Contact the Ternullo Real Estate Team today to learn how we can help you sell your home.

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      5 Reasons Homeownership Makes 'Cents'

      Home Ownership Makes CentsThe American Dream of homeownership is alive and well. Recent reports show that the U.S.  homeownership rate has rebounded from recent lows and is headed in the right direction. The personal reasons to own differ for each buyer, but there are many basic similarities.

      Today we want to talk about the top 5 financial reasons you should own your own home.

      1. Homeownership is a Form of Forced Savings

      Paying your mortgage each month allows you to build equity in your home that you can tap  into later in life for renovations, to pay off high-interest credit card debt, or even send a child  to college. As a renter, you guarantee that your landlord is the person with that equity.

      2. Homeownership Provides Tax Savings

      One way to save on taxes is to own your own home. You may be able to deduct your  mortgage interest, property taxes, and profits from selling your home, but make sure to  always check with your accountant first to find out which tax advantages apply to you in your area.

      3. Homeownership Allows You to Lock in Your Monthly Housing Cost

      When you purchase your home with a fixed-rate mortgage, you lock in your monthly  housing cost for the next 5, 15, or 30 years. Interest rates remained around 4% all last year,

      marking some of the lowest rates in history. The value of your home will continue to rise with  inflation, but your monthly costs will not.

      4. Buying a Home Is Cheaper Than Renting

      According to the latest report from Trulia, it is now 37.4% less expensive to buy a home of  your own than to rent in the U.S. That number varies throughout the country but ranges from  6.5% cheaper in San Jose, CA to 50.1% cheaper in Detroit, MI.

      5. No Other Investment Lets You Live Inside of It

      You can choose to invest your money in gold or the stock market, but you will still need  somewhere to live. In a home that you own, you can wake up every morning knowing that your investment is gaining value while providing you a safe place to live.

      Bottom Line

      Before you sign another lease, let’s get together to help you better understand all your  options.

      For more information, please contact the Ternullo Real Estate Team.

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