Blog :: 2016

Homeowner's Net Worth Is 45x Greater Than A Renter's

Every three years, the Federal Reserve conducts a Survey of Consumer Finances in which they collect data across all economic and social groups. The latest survey, which includes data from 2010-2013, reports that a homeowner’s net worth is 36 times greater than that of a renter ($194,500 vs. $5,400).

In a Forbes article, the National Association of Realtors’ (NAR) Chief Economist Lawrence Yun predicts that by the end of 2016, the net worth gap will widen even further to 45 times greater.

The graph below demonstrates the results of the last two Federal Reserve studies and Yun’s prediction:

 

Put Your Housing Cost to Work for You

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. Every time you pay your rent, you are contributing to your landlord’s net worth.

The latest National Housing Pulse Survey from NAR reveals that 85% of consumers believe that purchasing a home is a good financial decision. Yun comments:

“Though there will always be discussion about whether to buy or rent, or whether the stock market offers a bigger return than real estate, the reality is that homeowners steadily build wealth. The simplest math shouldn’t be overlooked.”

Bottom Line

If you are interested in finding out if you could put your housing cost to work for you by purchasing a home, let’s get together and evaluate your ability to buy today!

 

Comments

  1. No comments. Be the first to comment.

Fed Hikes Rates: The Mortgage Impact

DAILY REAL ESTATE NEWS | THURSDAY, DECEMBER 15, 2016 

The Federal Reserve hiked short-term interest rates Wednesday, in a move largely predicted by economists. So, what does this mean for mortgage rates and buyers?

Read moreFed Warns About a 'New Housing Crisis'

First off, the Fed does not set mortgage rates. Short-term rates are different from long-term rates. Mortgage rates typically follow long-term bond rates, such as the 10-year U.S. Treasury note. Longer-term rates typically adjust before the Fed makes a move.

Indeed, mortgage rates have risen near to 60 basis points since the presidential election. More than twice the quarter-point increase that the Fed voted on Wednesday.

The Fed announced that it expects to raise short-term rates three times next year by a total of 75 basis points.

“That means rates like we’ve seen for most of the past five years are indeed history,” writes Jonathan Smoke, realtor.com®’s chief economist, in his latest column. Mortgage rates in the 3 percent range are gone.  

“Mortgage rates will move higher before the Fed acts again, so if the Fed carries out its three planned hikes in 2017, we could come close to 5 percent on 30-year conforming rates before the end of next year,” Smoke notes.

On Wednesday, the average 30-year conforming rate was just under 4.2 percent.

Smoke believes that rates are more likely to move in the month ahead of each key Fed policy meeting. As such, the important meetings to note are in March, June, September, and December 2017.

How big of an impact could rising rates have in the coming months? A median-priced home would be $978 per month payment at Wednesday’s rate of 4.2 percent (and assuming a 20 percent down payment), realtor.com® notes. Take that rate to 5 percent, the monthly payment jumps up to $1,074, nearly $100 more.

“If you intend to buy next year and finance the purchase with a mortgage, acting sooner rather than later will cost you less,” Smoke says is the message to home buyers.

Source: “Fed’s Rate Hike Confirms It: Time Is Running Out on Low Mortgage Rates,” realtor.com® (Dec. 15, 2016)

 

Will Increasing Mortgage Rates Impact Home Prices?

Will Increasing Mortgage Rates Impact Home Prices?

Will Increasing Mortgage Rates Impact Home Prices? | MyKCM

There are some who are calling for a decrease in home prices should mortgage interest rates begin to rise rapidly. Intuitively, this makes sense as the cost of a home is determined by the price of the home, plus the cost of financing that home. If mortgage interest rates increase, fewer people will be able to buy, and logic says prices will fall if demand decreases.

However, history shows us that this has not been the case the last four times mortgage interest rates dramatically increased.

Here is a graph showing what actually happened:

Will Increasing Mortgage Rates Impact Home Prices? | MyKCM

Last week, in an article titled “Higher Rates Don’t Mean Lower House Prices After All,the Wall Street Journal revealed that a recent study by John Burns Real Estate Consulting Inc. found that:

“[P]rices weren’t especially sensitive to rising rates, particularly in the presence of other positive economic factors, such as strong job growth, rising wages and improving consumer confidence.”

Last week’s jobs report was strong and the Conference Board just reported that the Consumer Confidence Index was back to pre-recession levels.

Bottom Line

We will have to wait and see what happens as we move forward, but a decrease in home prices should rates go up is anything but guaranteed.

 

Welcome to our new blog!

We look forward to making this the best resource for information about real estate, our local area, and current topics that impact you. Please feel free to comment on our posts if you have questions or reactions to share. If there is anything you'd like to see us write about, we'd love to hear your ideas.

    Comments

    1. No comments. Be the first to comment.