6 Stellar Reasons to Buy a Home in 2016

Is it really 2016 already?  For those of you who happen to be planning on buying a home in the new year—or even just trying to—there’s a whole lot to celebrate. Why? A variety of financial vectors have dovetailed to make this the perfect storm for home buyers to get out there and make an (winning) offer. Here are six home-buying reasons to be thankful while ringing in the new year:

Reason No. 1: Interest rates are still at record lows

Even though they may creep up at any moment, it’s nonetheless a fact that interest rates on home loans are at historic lows, with a 30-year fixed-rate home loan still hovering around 4%.

“Remember 18.5% in the ’80s?” asks Tom Postilio, a real estate broker with Douglas Elliman Real Estate and a star of HGTV’s “Selling New York.”“It is likely that we’ll never see interest rates this low again. So while prices are high in some markets, the savings in interest payments could easily amount to hundreds of thousands of dollars over the life of the mortgage.”

Reason No. 2: Rents have skyrocketed

Another reason home buyers are lucky is that rents are going up, up, up! (This, on the other hand, is a reason not to be thankful if you’re a renter.) In fact, rents outpaced home values in 20 of the 35 biggest housing markets in 2015. What’s more, according to the 2015 Rent.com Rental Market Report, 88% of property managers raised their rent in the past 12 months, and an 8% hike is predicted for 2016.

“In most metropolitan cities, monthly rent is comparable to that of a monthly mortgage payment, sometimes more,” says Heather Garriock, mortgage agent for The Mortgage Group. “Doesn’t it make more sense to put those monthly chunks of money into your own appreciating asset rather than handing it over to your landlord and saying goodbye to it forever?”

Reason No. 3: Home prices are stabilizing

For the first time in years, prices that have been climbing steadily upward are stabilizing, restoring a level playing field that helps buyers drive a harder bargain with sellers, even in heated markets.

“Local markets vary, but generally we are experiencing a cooling period,” says Postilio. “At this moment, buyers have the opportunity to capitalize on this.”

Reason No. 4: Down payments don’t need to break the bank

Probably the biggest obstacle that prevents renters from becoming homeowners is pulling together a down payment. But today, that chunk of change can be smaller, thanks to a variety of programs to help home buyers. For instance, the new Fannie Mae and Freddie Mac Home Possible Advantage Program allows for a 3% down payment for credit scores as low as 620.

Reason No. 5: Mortgage insurance is a deal, too

If you do decide to put less than 20% down on a home, you are then required to have mortgage insurance (basically in case you default). A workaround to handle this, however, is to take out a loan from the Federal Housing Administration—a government mortgage insurer that backs loans with down payments as low as 3.5% and credit scores as low as 580. The fees are way down from 1.35% to 0.85% of the mortgage balance, meaning your monthly mortgage total will be significantly lower if you fund it this way. In fact, the FHA predicts this 37% annual premium cut will bring 250,000 first-time buyers into the market. Why not be one of them?

Reason No. 6: You’ll reap major tax breaks

Tax laws continue to favor homeowners, so you’re not just buying a place to live—you’re getting a tax break! The biggest one is that unless your home loan is more than $1 million, you can deduct all the monthly interest you are paying on that loan. Homeowners may also deduct certain home-related expenses and home property taxes.

Americans Think Buying a Home Is a Good Financial Decision, 2015 Survey Says

NAR’s eleventh Housing Pulse Survey shows a vast majority of Americans believe that buying a home is a solid financial decision, and most believe they could sell their home for at least its initial purchase price.

The survey, which measures consumers’ attitudes and concerns about housing issues, found that building equity; wanting a stable and safe environment; and having the freedom to choose their neighborhood remain the top three reasons to own a home. The number of renters who are now thinking about purchasing a home has increased since the last survey in 2013, up from 36 percent to 39 percent.

The telephone survey of 1,000 adults nationwide in the 50 most populous metropolitan statistical areas was conducted for NAR by American Strategies and Myers Research & Strategic Services for NAR”s Housing Opportunity Program. An additional 250 interviews were conducted with millennial adults (born after 1981) from the same geography.

Some key findings from the year’s survey include:

• More than eight in 10 Americans believe that purchasing a home is a good financial decision, and 68 percent believe that now is a good time to buy a home.
• Sixty-one percent of renters now say that eventually owning a home is one of their highest personal priorities, up 11 points from 2013.
• Respondents expect to see continued improvement, as 89 percent expect real estate sales to increase or remain the same.

How Do Homeowners Accumulate Wealth?

Posted in Economist Commentaries, by Lawrence Yun, PhD., Chief Economist and Senior Vice President on October 19, 2015

The differences between buying and renting are massive.  According to the Federal Reserve, a typical homeowner’s net worth was $195,400, while that of renter’s was $5,400.  The data reflects 2013 and the next survey of household finances, which is conducted every three years, will be out in 2016.  Based on what has happened since 2013 and projecting a conservative assumption of what could happen next year to home prices if we see only 3% price growth, the wealth gap between homeowners and renters will widen even further. The Fed is likely to show a figure of $225,000 to $230,000 in median net worth for homeowners in 2016 and around $5,000 for renters. That is, a typical homeowner will be ahead of a typical renter by a multiple of 45 on a lifetime financial achievement scale.

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. A vast majority of homebuyers take out a 30-year fixed rate mortgage to make a home purchase. After 30 years, there is no mortgage payment (nor rent payment). So the home price growth over that time period would be the equity that the homebuyer would have accumulated. For example, the median home price of a single-family dwelling in the U.S. thirty years ago in 1985 was $75,500. This year, it will be at least $220,000. That figure of $220,000 is the housing component of the person’s wealth. Even had home prices not risen, the person would still have $75,500 in wealth today – on top of not paying any further monthly mortgage after 30 years.

This simple example does not play out nearly as neatly in the real world, since people do not stay in one residence over the 30 year period. Almost all homeowners trade up, change neighborhoods, or move to a better school district at some point. However, they are able to make those residential relocations due to the housing equity accumulated, even over a shorter period, and can immediately apply that equity to the next home as a downpayment. Therefore the conditions of steadily building housing wealth still hold.

We also know that not everyone can or should be homeowners. The memories of easily accessible subprime mortgages and subsequent harsh foreclosure pains are still fresh, and remind us of the devastating impact on the families involved, local communities, and to the broad economy. In addition most young adults have not developed the financial standing or have found a stable, desirable career and, therefore, choose not be homeowners until later.  The homeownership rate among households under the age of 35 is 35% currently and rarely rises above 40% historically. For those under the age of 25, the current ownership rate is 23% and rarely rises above 25%. But the time will eventually come when people want to convert to ownership. By the time people are in their prime-earning years of 45-to-55, nearly three-fourths do eventually become homeowners. By retirement, nearly 80% are homeowners.

A recent survey of consumers commissioned by my organization revealed that 80% believe that purchasing a home is a good financial decision (2015 National Housing Pulse Survey). Most consumers appear to already understand the simple math and the benefits of homeownership. So don’t overthink the matter of whether now is a good time to buy, or whether stock market returns will be better. The exact timing of a home purchase will have little financial impact in the big scheme of things. Just know that homeowners generally do come out ahead of renters in the long run.

The Next Three Months: Best Time to Buy

DAILY REAL ESTATE NEWS | TUESDAY, OCTOBER 06, 2015

Low mortgage rates, declining home prices, and homes that are lingering on the market longer are three main reasons why the next three months could be the best time to buy so far this year, says Jonathan Smoke, realtor.com®’s chief economist.

“The spring and summer home-buying seasons were especially tough on potential buyers this year with increasing prices and limited supply,” Smoke says. “Buyers who are open to a fall or winter purchase should find some relief with lower prices and less competition from other buyers.”

The biggest challenge buyers will likely face buying in the next three months is the limited number of choices. There are fewer homes for-sale this fall than last year and housing inventory has already peaked for 2015, Smoke says.

In many markets, real estate is making its seasonal transition and is tilting in favor of home buyers lately.

Also, buyers are locking in low mortgage rates as the Federal Reserve continues to delay raising rates. For the past 10 weeks, the 30-year fixed-rate mortgage has averaged below 4 percent, according to Freddie Mac.

Here are some more factors pointing to a slowdown in the overall housing market:

• Median home prices dropped 1 percent month-over-month in August (however, prices are still up 6 percent year-over-year).
• Homes are staying on the market longer: The median age of home inventory is 80 days, up nearly 7 percent from August.
• Mortgage applications dropped 6.7 percent week-to-week.

First Step for Buyers: Know Your Credit Score

DAILY REAL ESTATE NEWS | FRIDAY, MAY 29, 2015 

You may want to make sure your home buyers know their credit score before they begin their house hunt. A new survey finds that house hunters who know their credit scores feel significantly more prepared to buy a home.

Yet, just half of recent buyers say they have checked their credit as soon as they considered purchasing a home, according to the survey, commissioned by Experian, of 250 recent and 250 future home buyers.

"No one likes to go into a lender's office, whether buying or refinancing, and not know the state of their credit; it makes them feel helpless," says Becky Frost, senior manager of consumer education at Experian Consumer Services. "Our survey shows when people interact with their credit by tracking it and learning more about the factors that affect it, they feel more confident about their purchase power."

Still, more than two in five future home buyers are concerned that they will not qualify for the best home loan rate and have even delayed purchasing to improve their credit, the survey found. Fifty-eight percent of buyers surveyed say they are working to improve their credit to qualify for a better home loan rate, but 35 percent of future buyers say they are not sure what steps to take to qualify for a larger loan.

For those who are working to improve their credit, the top actions respondents said they've taken are paying off their debt, paying bills on time, keeping balances low on credit cards, protecting credit card information from fraud or identity theft, and not applying for or opening new credit accounts.

Iowa Home Prices Up Slightly

Iowa Home Prices Up Slightly 

CLIVE, IOWA (March 12, 2014) – According to the Iowa Association of REALTORS^® (IAR), home prices rose slightly and sales decreased in February. 

IAR’s March 2014 Housing Trends Report shows that the average sale price of homes across Iowa was $141,489, up .5 percent from last March.  The average sale price in March 2013 was $140,751. 

According to IAR, sales decreased by 5.1 percent from last year. IAR reports 1,792 homes sold in March 2014, while 1,889 homes sold in March 2013. 

Twenty-six of Iowa’s 44 local boards reported increases in average sale price, while 16 boards had increases in the number of sales.

The statewide average number of days on the market last month was 103 days, up 1 days or 1 percent from last March. Twenty-three boards showed a decrease in days on the market.

Kathy Miller, IAR 2014 President, says, “The extreme cold, snow, and wind that we’ve experienced this winter, has defiantly influenced buyers and sellers across the state.  Sellers are inclined to wait for warmer weather to list, and buyers are reluctant to move in the inclement weather we’ve experienced.”  Miller expresses optimism by saying, “However, spring is in the air; and we’re sure to see an increase in activity in March.  Interest rates remain low, which should bring buyers to the table and help sellers get their properties sold.” 

Home sales prices continue to rise

CLIVE, IOWA (Feb. 13, 2014)-According to the Iowa Association of Realtors® (IAR) home sales dipped slightly in January, however home prices continued to rise. 

In the January 2014 Housing Trends Report, IAR reports that the average sale price increased by another 6 percent and the median sale price was up 3.4 percent.  The average sale price was $136,489 in January 2013 and $144,724 in January 2014.  The median went from $116,000 in January 2013 to $120,000 in January 2014.  Twenty-nine of the 44 local Realtor® boards in the state reported increases in the average sale price, and twenty-eight had increases in the median sale price. 

Sales across the state saw a decrease of 9 percent from last year at this time with 176 fewer homes being sold in January of this year.  The report shows that 1,954 homes were sold in January 2013, while 1,778 homes were sold in January 2014.  Eighteen boards saw increases in sales in their respective areas last month.  

The average days on the market (DOM) was 94 days, down 8 days or 7.8 percent from last January.  Twenty-eight of the local boards saw a decrease in DOM.  

Kathy Miller, IAR 2014 President says, “We continue to feel optimistic about the housing market given the decrease in DOM and increase in sales price.  However, being the 9^th coldest winter in the past 121 years has proven to be a hindrance on sales throughout the state. Like many Iowans, Realtors® are looking forward to warmer temperatures!”

The information used to create the IAR January 2014 Housing Trends Report was current as of February 12 at 8:07 a.m. The information is subject to change due to the dynamic nature of the IAR’s housing statistics system, which is updated hourly based on information present in local participating MLS (multiple listing service) systems. 

The term Realtor^® is a registered trademark, which identifies real estate professionals who follow a strict code of ethics as members of the National Association of Realtors^®. The Iowa Association of Realtors^® is the state’s largest real estate professional organization representing more than 6,400 members and affiliates. The IAR releases a Housing Trends Report each month. Data is collected from local Realtor^® boards through their multiple listing service (MLS), which tracks sales activities in the board area. The IAR compiles all of the local board data into the statewide report each month. Reports are available online to IAR members and affiliates with a login and password. Anyone is eligible to become an IAR affiliate. For membership information, visit www.iowarealtors.com.