The Cost of Renting?

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Some Highlights:

  • The percentage of income needed to afford a median priced home is almost half the percentage of income needed to afford median rent.
  • Buying costs are significantly less than renting costs.
  • The percentage of income needed to afford a median priced home is less than the historic norm.
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Sales Up in Nearly Every Price Range

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The National Association of Realtors’ most recent Existing Home Sales Report revealed that home sales were up rather dramatically over last year in five of the six price ranges they measure.

Only those homes priced under $100,000 showed a decline (-4.6%). The decline in this price range points to the lower inventory of distressed properties available for sale and speaks to the strength of the market.

Every other category showed a minimum increase of at least 4.6%, with sales in the $250,000- $500,000 range up 15.2%!

Here is the breakdown:

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What does that mean to you if you are selling?

Houses are definitely selling. If your house has been on the market for any length of time and has not yet sold, let’s meet up to see if it is priced appropriately to compete in today’s market.

Real Estate #1 Long Term Investment

STM-ShareThe Gallup organization recently released a survey in which Americans were asked to rank what they considered to be the “best long term investment.” Real estate ranked number one, with 35% of those surveyed saying it was a better long term investment than stocks & mutual funds, gold, savings accounts or bonds.

Here is the breakdown:

Americans Rank Real Estate #1 Long Term Investment | Simplifying The Market

The survey revealed that real estate was the number one choice among each of the following groups:

  • Men
  • Women
  • People between the ages of 18-29
  • People between the ages of 30-49
  • People between the ages of 50-64
  • People 65 and older
  • People with annual earnings of less than $30,000
  • People with annual earnings between $30,000 and $74,999
  • People with annual earnings of over $75,000
  • People with a college degree
  • People without a college degree

Even stock investors ranked real estate number one. According to the report:

“With housing prices showing a steadier path upward in recent months, even stock investors are about as likely…to choose real estate (37%) as stocks (32%) as the best long-term investment.”

Homes Selling Strong

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The National Association of Realtors (NAR) recently released their latest Existing Home Sales Report, which revealed that homes were on the market for an average of 47 days in March. This is a decrease from the 59 days reported in February, as well as the 52 days reported back in March 2015.

42% of homes across the country were on the market for less than a month, which is the highest it’s been since July 2015 (43%)!

Among the states with homes selling in 30 days or less are Washington, Oregon, and Minnesota. The map below was created using results from NAR’s Monthly Realtor Confidence Survey.

Homes Continue to Sell Quickly Nationwide | Simplifying The Market

Bottom Line

Buyer demand is increasing as the inventory of homes available for sale remains low. If you are thinking about listing your home for sale this year, let’s meet up so I can help you take advantage of current market conditions!

2016 The Best Year in Real Estate in a Decade

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In today’s market we are seeing a healthy supply of buyers entering the market and bidding on the limited inventory available which is helping to drive new construction and support the increase in home prices.

A few weeks ago, Jonathan Smoke, the Chief Economist at realtor.com, exclaimed: “All indicators point to this spring being the busiest since 2006.” Now, Freddie Mac has doubled down on that claim and is saying that 2016 will be the best year that the real estate industry has seen in a decade. In their March Housing Outlook Report, Freddie Mac explained:

“Despite the challenges facing the housing market, we expect this to be the best year for housing in a decade. Home sales, housing starts, and house prices will reach their highest level since 2006 according to our latest forecast…Challenges remain, with low housing supply and declining affordability being a key concern in many markets, but on balance, the housing markets in the U.S. are poised for the best year since 2006.”

The key indicators that have given Freddie Mac such a positive outlook are:

  • Low interest rates
  • A resilient labor market
  • An increase in household formations
  • A projected increase in newly constructed homes

Bottom Line

2016 looks to be shaping up as a great year for residential real estate. Whether you are thinking of buying or selling, now may be the time to sit down with a real estate professional to discuss the new opportunities that are arising.

Rent or Buy – Either Way Your Paying a Mortgage

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There are some renters that have not yet purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent free, you are paying a mortgage – either your mortgage or your landlord’s. As The Joint Center for Housing Studies at Harvard University explains:

“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return.   That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

Christina Boyle, a Senior Vice President, Head of Single-Family Sales & Relationship Management at Freddie Mac, explains another benefit of securing a mortgage vs. paying rent:

“With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”

As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity. The graph below shows the widening gap in net worth between a homeowner and a renter:

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Bottom Line

Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, owning might make more sense than renting with home values and interest rates projected to climb.

Should I Wait to Buy a Home?

What If I Wait Until Next Year To Buy A Home? | Keeping Current Matters

As a seller, you will be most concerned about ‘short term price’ – where home values are headed over the next six months. As either a first-time or repeat buyer, you must not be concerned only about price but also about the ‘long term cost’ of the home.

Let us explain.

There are many factors that influence the ‘cost’ of a home. Two of the major ones are the home’s appreciation over time, and the interest rate at which a buyer can borrow the funds necessary to purchase their home. The rate at which these two factors can change is often referred to as “The Cost of Waiting”.

What will happen over the next 12 months?

According to CoreLogic’s latest Home Price Index, prices are expected to rise by 5.5% by this time next year. Additionally, Freddie Mac’s most recent Economic Commentary & Projections Table predicts that the 30-year fixed mortgage rate will appreciate to 4.5% in that same time.

What Does This Mean to a Buyer?

Here is a simple demonstration of what impact these projected changes would have on the mortgage payment of a home selling for approximately $250,000 today:

What If I Wait Until Next Year To Buy A Home? | Keeping Current Matters