Homeownership

Benefits of Owning a Home

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Last week in response to my newsletter on interest rates, an old work colleague and proud long-time renter reached out to me to share his epiphany. He said, “I just realized that even though I rent, I am paying a mortgage. It’s just not mine.” 

No matter how you slice it you are paying a mortgage, either your landlord’s or your own. You can either contribute to someone else’s net worth or to yours.

The benefits of homeownership are many and while the current geo-political and economic forecast feel grim, it's important to realize that the real estate market goes through cycles but over the long term remains a very sound investment. Over beers at a local brewery we talked about the many advantages of homeownership.

Whether you are a first time buyer, a move up or downsizing buyer, or even if you want to invest and become a landlord yourself, read on to learn more about the benefits of owning a home:


1. Appreciation – If you bought during the bidding war frenzy you may now feel like you overpaid; still, if your goal now is as it was then, is to remain in your home for 5 or more years, you are more than likely to realize a gain. Real estate is not day trading. For those on the fence about purchasing a home or worried about a potential recession, keep in mind the factors contributing to the housing bubble are not in play now. If you are optimistic about your long-term employment and residing here, you have a fabulous opportunity with historically low interest rates and more inventory. 

2. Building Equity/Net worth – Sure, you’ll have a mortgage to pay but that payment is applied toward reducing the principal balance on your investment vs. the money that you’ll never see again once your landlord cashes your rent check. People who want to own a home, especially in pricier areas such is our region, find it difficult to save for a down payment while also paying rent. With the shift in the market more buyers are able to avoid bidding wars, negotiate on price, or put less than 20% down. Consider acting now while rates are low and the market leans more towards favoring buyers.

3. Tax Advantages – Though every situation is unique, and you should consult your tax advisor, according to the Tax Policy Center homeowners may deduct mortgage interest and property tax payments, as well as certain other expenses from their federal taxable income. When you rent, you cannot take these deductions – but your landlord can! Additionally, homeowners may exclude, up to a limit, the capital gain they realize from the eventual sale of their home.

4. Stability – So far as you purchase within your means and are confident about your long-term employability, you won’t have to move unless and until you want to. This is in contrast to a rental where you may choose - or sometimes be forced - to find a new place at the end of the lease term. Worse, when rents increase you might not be able to afford it.  Homeownership provides a level of stability no rental can.

If you’re on the fence and want to talk further about what makes sense for you, don’t hesitate to reach out - I’m here to help you make an informed decision with clarity and confidence.

3 Powerful Reasons To Buy A Home Now

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Whether you are a first-time buyer or looking to move up to the home of your dreams, now is a great time to purchase a home. Here are three major reasons to buy today.

1. Affordability

Many people focus solely on price when talking about home affordability. Since home prices have appreciated throughout the past year, they assume homes are less affordable. However, affordability is determined by three components:

  • Price

  • Wages

  • Mortgage Interest Rate

Prices are up, but so are wages – and interest rates have recently dropped dramatically (see #2 below). As a result, the National Association of Realtors’ (NAR) latest Affordability Index report revealed that homes are MORE affordable throughout the country today than they were a year ago.

“All four regions saw an increase in affordability from a year ago. The South had the biggest gain in affordability of 6.9%, followed by the West with a gain of 6.0%. The Midwest had an increase of 5.8%, followed by the Northeast with the smallest gain of 1.8%.”

2. Mortgage Interest Rates

Mortgage rates have dropped almost a full point after heading toward 5% last fall and early winter. Currently, they are below 4%.

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Additionally, Fannie Mae recently predicted the average rate for a 30-year fixed mortgage will be 3.7% in the second half of 2019. That compares to a 4.4% average rate in the first quarter and 4% in the second quarter.

With mortgage rates remaining near historic lows, Fannie Mae and others have increased their forecasts for housing appreciation for the rest of the year. If home price gains are about to re-accelerate, buying now rather than later makes financial sense.

3. Increase Family Wealth

Homeownership has always been recognized as a sensational way to build long-term family wealth. A new report by ATTOM Data Solutions reveals:

“U.S. homeowners who sold in the second quarter of 2019 realized an average home price gain since purchase of $67,500, up from an average gain of $57,706 in Q1 2019 and up from an average gain of $60,100 in Q2 2018. The average home seller gain of $67,500 in Q2 2019 represented an average 33.9 percent return as a percentage of original purchase price.”

The longer you delay purchasing a home, the longer you are waiting to put the power of home equity to work for you.

Bottom Line

With affordability increasing, mortgage rates decreasing, and home values about to re-accelerate, it may be time to talk with a local real estate professional to determine if buying now makes sense for your family.

SOURCE: Keeping Current Matters