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      Michael Lyons

      The Real Reason Americans Buy a Home

      The Real Reasons Americans Buy A Home | Keeping Current Matters

      We often talk about the financial reasons why buying a home makes sense. But often, the emotional reasons are the more powerful, or compelling reasons. The Joint Center for Housing Studies at Harvard University performs a study every year surveying participants for the reasons that American’s feel are most important in regards to homeownership.

      The top 4 reasons to own a home cited by respondents were not financial.

      1. It means having a good place to raise children & provide them with a good education

      From the best neighborhoods to the best school districts, even those without children at the time of purchasing their home, may have this in the back of their mind as a major reason for choosing the location of the home that they purchase.

      2. You have a physical structure where you & your family feel safe

      It is no surprise that having a place to call home with all that means in comfort and security is the #2 reason.

      3. It allows you to have more space for your family

      Whether your family is expanding, or an older family member is moving in, having a home that fits your needs is a close third on the list.

      4. It gives you control over what you do with your living space, like renovations and updates

      Looking to actually try one of those complicated wall treatments that you saw on Pinterest? Want to finally adopt that puppy or kitten you’ve seen online 100 times? Who’s to say that you can’t in your own home?

      The 5th reason on the list, is the #1 financial reason to buy a home as seen by respondents:

      5. Owning a home is a good way to build up wealth that can be passed along to my family

      Either way you are paying a mortgage. Why not lock in your housing expense now with an investment that will build equity that you can borrow against in the future?

      Bottom Line

      Whether you are a first time homebuyer or a move-up buyer who wants to start a new chapter in their life, now is a great time to reflect on the intangible factors that make a house a home.

      When is it a Good Time to Rent? Definitely NOT Now!

      People often ask whether or not now is a good time to buy a home. No one ever asks when a good time to rent is. However, we want to make certain that everyone understands that today is NOT a good time to rent.

      The Census Bureau just released their second quarter median rent numbers. Here is a graph showing rent increases from 1988 until today:

      Median Asking Rent Since 1988 | Keeping Current Matters

      At the same time, a report by Axiometrics revealed:

      "The national apartment market's annual effective rent growth rate of 5.1% in June 2015 represented a 47-month high, and continued a streak of 5.0%-plus rent growth that is now the longest in at least six years, according to apartment market research. The effective rent growth in June 2014 was 3.7%, putting June 2015's exceptional performance into perspective.

      This is the highest rate since the 5.3% of July 2011. The metric has reached at least 5.0% for five straight months, the longest such streak since Axiometrics started monthly reporting of annual apartment data in April 2009."

      Where will rents be headed in the future?

      Stephanie McCleskey, Axiometrics vice president of research, commented on the above report in an article by Real Estate Economy Watch:

      "Rent growth is just shy of the post-recession peak, and the June metrics reflect the continued strength of the apartment market. The demand for apartments is still strong, despite the record number of new units being delivered this year. Tight occupancy is why landlords can push rents higher."

      Pending Home Sales Remained Strong in June

       

      Pending Home Sales Remain Strong In June | Keeping Current Matters

      The National Association of REALTORSPending Home Sales Index is "a forward-looking indicator based on contract signings". The higher the Pending Home Sales Index number, the more contracts have been signed by buyers that will soon translate to sales.

      The latest index was released last week, with the headline:

      Pending Home Sales Dip in June

      As we reported last month, May's Index levels were the highest recorded in the last 9 years. The small 1.8% decline from May remains 8.2% over last June and the third highest reading in two years. The NAR headline, while accurate, isn't the best representation of what really happened.

      NAR's Chief Economist Lawrence Yun points towards "low inventory levels in many markets" leading to "reduced choices" at higher price points for the small decline in National Pending Home Sales.

      In every major region of the country, pending sales are up year-over-year as shown by the graph below:

      Pending Home Sales By Region | Keeping Current Matters

      Yun goes on to say that there needs to be a significant influx of inventory into the market before anything will change.

      "Unfortunately, because nearly all of these sellers are likely buying another home, there isn't a net increase in inventory. A combination of homebuilders ramping up construction and even more homeowners listing their properties on the market is needed to tame price growth and give all buyers more options." 

      So What Does This Mean To Buyers?

      There is a lot of competition out there right now for your dream home. Prices are going to continue to climb, act now before you are priced out of your future home.

      What Does This Mean to Sellers?

      If you are on the fence about listing your home for sale and debating whether now is the time to move on with your plans of relocating... don't wait!

      There are more buyers that are ready, willing and able to buy their first, second, third, vacation, or investment property now than there has been in years! The supply of homes for sale is not keeping up with the demand of these buyers.

      Listing your home for sale now will give you the most exposure to buyers and the best sales price.

      Bottom Line

      Whether you are planning on buying or selling a house this year, waiting to act no longer makes sense.


      5 Reasons to Hire a Real Estate Professional Today!

      Whether you are buying or selling a home, it can be quite an adventurous journey. You need an experienced Real Estate Professional to lead you to your ultimate goal. In this world of instant gratification and internet searches, many sellers think that they can For Sale by Owner or FSBO.

      The 5 Reasons You NEED a Real Estate Professional in your corner haven’t changed, but have rather been strengthened due to the projections of higher mortgage interest rates & home prices as the market continues to recover.

      1. What do you do with all this paperwork?

      Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true Real Estate Professional is an expert in their market and can guide you through the stacks of paperwork necessary to make your dream a reality.

      2. Ok, so you found your dream house, now what?

      According to the Orlando Regional REALTOR Association, there are over 230 possible actions that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, who knows what these actions are to make sure that you acquire your dream.

      3. Are you a good negotiator?

      So maybe you’re not convinced that you need an agent to sell your home. However, after looking at the list of parties that you need to be prepared to negotiate with, you’ll realize the value in selecting a Real Estate Professional. From the buyer (who wants the best deal possible), to the home inspection companies, to the appraiser, there are at least 11 different people that you will have to be knowledgeable with and answer to, during the process.

      4. What is the home you’re buying/selling really worth?

      It is important for your home to be priced correctly from the start to attract the right buyers and shorten the time that it’s on the market. You need someone who is not emotionally connected to your home to give you the truth as to your home’s value. According to the National Association of REALTORS, “the typical FSBO home sold for $208,700 compared to $235,000 among agent-assisted home sales.”

      Get the most out of your transaction by hiring a professional.

      5. Do you know what’s really going on in the market?

      There is so much information out there on the news and the internet about home sales, prices, mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively price your home correctly at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a low-ball offer?

      Dave Ramsey, the financial guru advises:

      “When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”

      Hiring an agent who has their finger on the pulse of the market will make your buying/selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.

      Bottom Line:

      You wouldn’t replace the engine in your car without a trusted mechanic. Why would you make one of your most important financial decisions of your life without hiring a Real Estate Professional?

      Should I Rent My House Instead of Selling It?

      Should I Rent My House Instead of Selling It? | Keeping Current Matters

      The results of Fannie Mae's June 2015 National Housing Survey were just released showing that more and more homeowners are warming up to the idea that now may be a great time to sell their home.

      The amount of respondents that stated that now is a good time to sell rose three percentage points to a survey high of 52%; which may translate to a healthier market as more homes are listed in the coming months.

      At the same time “the percentage of respondents who expect home rental prices to go up rose to 59% – a new survey high.” Doug Duncan, senior vice president and chief economist at Fannie Mae, gave this insight: “The expectation of higher rents is a natural outgrowth of increasing household formation by newly employed individuals putting upward pressure on rental rates.”

      There is a chance that those who believe rental prices will rise may consider renting their house rather than selling it at this time.

      However, if you have no desire to actually become an educated investor in this sector, you may be headed for more trouble than you were looking for. Are you ready to be a landlord?

      Before renting your home, you should answer the following questions to make sure this is the right course of action for you and your family.

      10 Questions to ask BEFORE renting your home

      1. How will you respond if your tenant says they can’t afford to pay the rent this month because of more pressing obligations? (This happens most often during holiday season and back-to-school time when families with children have extra expenses).
      2. Because of the economy, many homeowners cannot make their mortgage payment. What percentage of tenants do you think cannot afford to pay their rent?
      3. Have you interviewed experienced eviction attorneys in case a challenge does arise?
      4. Have you talked to your insurance company about a possible increase in premiums as liability is greater in a non-owner occupied home?
      5. Will you allow pets? Cats? Dogs? How big a dog?
      6. How will you actually collect the rent? By mail? In person?
      7. Repairs are part of being a landlord. Who will take tenant calls when necessary repairs come up?
      8. Do you have a list of craftspeople readily available to handle these repairs?
      9. How often will you do a physical inspection of the property?
      10. Will you alert your current neighbors that you are renting the house?

      Bottom Line

      Renting out residential real estate historically is a great investment. However, it is not without its challenges. Make sure you have decided to rent the house because you want to be an investor, not because you are hoping to get a few extra dollars by postponing a sale.

      Buy vs Rent: What Really Creates Family Wealth?

      There has been recent press regarding whether or not it makes better financial sense to rent rather than buy in today’s housing market. As an example, the recently released June Summary of the BH&J Buy vs. Rent Index reported:

      “…as of the end of the first quarter of 2015, the housing market in the U.S. and all cities in the index are trending either closer to renting being the superior option or strictly favoring renting over purchasing a home.”

      The summary goes on to explain that:

      “The index conducts a “horse race” comparison between an individual that is buying a home and an individual that rents a similar quality home andreinvests all monies otherwise invested in homeownership.”(emphasis added)

      Though the math may be correct, we are not as sure of the conclusion. Even if you check the methodology offered by the BH&J report itself, you will find that they realize:

      “…any extra savings from renting might be spent on non-wealth enhancing goods resulting in any benefits from renting versus owning disappearing in a cloud of consumption spending rather than savings.”

      The Concept of ‘Forced Savings’ and Wealth Accumulation

      Many believe the wealth accumulation of homeowners is tied into the concept of “forced savings”. The New York Times late last year published an editorial entitled,Homeownership and Wealth Creation, which discussed this conceptThe article explained:

      “Homeownership requires potential buyers to save for a down payment, and forces them to continue to save by paying down a portion of the mortgage principal each month.”

      “Even in instances where renters have excess cash, saving a substantial amount is difficult without a near-term goal, like a down payment. It is also difficult to systematically invest each month in stocks, bonds or other assets without being compelled to do so.”

      Many of the points that were made in the article are on track with the research done by the Joint Center for Housing Studies at Harvard University which agrees that “forced savings” is a major advantage of homeownership. In a paper, The Dream Lives On: the Future of Homeownership in America, they concluded:

      “Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

      The Truth is in the Historical Data

      Edwards Deming once said: “Without data, you’re just another person with an opinion.”

      Let’s look at the data on this subject. The Federal Reserve has conducted a study titled:Survey of Consumer Finances. The study found that the average net worth of a homeowner ($194,500) is 36 times greater than that of a renter ($5,400).

      Bottom Line

      The New York Times editorial articulated it best:

      “Homeownership long has been central to Americans’ ability to amass wealth; even with the substantial decline in wealth after the housing bust, the net worth of homeowners over time has significantly outpaced that of renters, who tend as a group to accumulate little if any wealth…As a means to building wealth, there is no practical substitute for homeownership.”

      If you are a renter who is considering making a purchase, sit with a local real estate professional who can explain the benefits of signing a contract to purchase over renewing your lease!

      4 Reasons to Buy NOW!!!

      4 Reasons to Buy NOW! | Keeping Current Matters

      Summer is here! The temperature isn't the only thing heating up right now, so too is the housing market! Here are four great reasons to consider buying a home today instead of waiting.

      1. Prices Will Continue to Rise

      The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report projects appreciation in home values over the next five years to be between 11.8% (most pessimistic) and 26.7% (most optimistic).

      The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

      2. Mortgage Interest Rates Are Projected to Increase

      Freddie Mac's Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have started to inch up, most experts predict that they will begin to rise even more over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac & the National Association of Realtors are in unison projecting that rates will be up approximately three quarters of a percentage point over the next 12 months.

      An increase in rates will impact YOUR monthly mortgage payment. Your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

      3. Either Way You are Paying a Mortgage

      As a recent paper from 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.”

      4. It's Time to Move On with Your Life

      The 'cost' of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.

      But, what if they weren't? Would you wait?

      Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe it is time to buy.

      Bottom Line

      If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

      Mortgage Rates Just Jumped Over 4%. Now What?

      Mortgage Rates Just Jumped Over 4%. Now What? | Keeping Current Matters

      Last week, mortgage interest rates jumped over the 4% mark for the first time this year according to Freddie Mac’s Mortgage Market Survey.

      In an article in Housing Wire, a Bankrate analyst explained:

      “Mortgage rates rocketed higher following a stronger than expected monthly employment report. The good news on the job front further solidifies the notion that the Federal Reserve will likely begin raising interest rates soon, perhaps in the third quarter of this year.”

      This is the same type of commentary we heard back in the spring of 2013 when the talk of the Fed possibly raising rates caused mortgage interest rates to surge by a full percentage point from the end of April through the end of June of that year.

      Will We See that Same Surge in 2015?

      No one knows for sure. However, Fannie Mae, Freddie Mac, the Mortgage Bankers Association and the National Association of Realtors are each calling for rates to continue their upswing over the next six quarters.

      Here is a chart comparing 2013 to this year:

      Mortgage Rate Spike Comparison | Keeping Current Matters

      Bottom Line

      Though no one can definitely say where rates will be six months from now, most experts believe they will be higher. If you are thinking of buying your first home or are considering a move up to the house of your family’s dreams, now may be the best time to do it.

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      Think You Should FSBO?...Think Again!

      Think You Should FSBO? Think Again!! [INFOGRAPHIC] | Keeping Current Matters

      Some Highlights:

      According to NAR's Profile of Home Buyers & Sellers:

      • 88% of buyers look for their new home online
      • Using a real estate agent can net you 13% more than FSBO'ing
      • There is a long list of people that you will have to negotiate with when you decide to sell your home, using an experienced professional can help ease the process.

      Where Will Mortgage Rates Be in 12 Months?

      One of the biggest questions plaguing the current housing market is where mortgage interest rates will be at this time next year. Over the last two months, rates have begun to creep up (see chart).

      Interest Rates.1

      Though we don’t like to project rates moving forward, we do want you and your family to have the information you need in order to decide whether to wait before buying your first house or moving up to your ultimate dream home.

      Here are the most current mortgage rate projections from Fannie Mae, Freddie Mac, the Mortgage Bankers’ Association and the National Association of Realtors.

      Interest Rates.2

      Projecting interest rates is not easy. So what should you do – do it now or wait? We like the advice Doug Duncan, senior vice president and chief economist at Fannie Mae, recently gave:

      “The rule for when is it time to buy is always the same: given your household budget and where current interest rates are, if it makes good financial sense to take out a home loan today, then today is the day to do it.”

      Bottom Line

      If you are ready, willing and able and are thinking of buying a home over the next twelve months, waiting may not make sense.

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