Becoming financially secure is an important goal for many people today, but some don’t realize just how much homeownership can help them achieve that dream. A recent report, The Journey Toward Financial Freedom, surveys Americans about their perspective on financial wellness and their goals. It shows there may be a significant misconception about the role owning a home plays in building wealth:
“Home ownership is one of the indicators Americans say is least connected to financial health.”
Two major personal wealth goals – homeownership and net worth – work hand-in-hand. Below are just a few reasons why, if you’re looking for financial security, homeownership should be a top priority.
Every three years, the Federal Reserve releases the Survey of Consumer Finances which highlights the difference in wealth between homeowners and renters. The graph below shows the findings across the previous surveys including the latest data (2019), and the results are staggering:
As the graph illustrates, the gap between homeowners and renters continues to widen. That’s because homeownership contributes massively to an individual’s overall net worth. Odeta Kushi, Deputy Chief Economist at First American, highlights this idea:
“. . . between 2016 and 2019, housing wealth was the single biggest contributor to the increase in net worth across all income groups . . . .”
When we look even closer at the most recent data from 2019, the average homeowner’s net worth is more than 40 times greater than that of the average renter (see graph below):
The gap exists in large part because homeowners build equity as their home appreciates in value and they pay off a portion of their mortgage each month. When you own your home, your monthly mortgage payment is, in essence, forced savings that come back to you when you sell your home or refinance. As a renter, you’ll never see a return on the money you pay out in rent every month.
If you’re ready to start building your net worth, the current real estate market offers several opportunities you should consider. For example, with today’s low mortgage rates, your purchasing power may be higher now than it has been in some time. That means there may be no better time than now to start working towards your homeownership goals – especially since rates are anticipated to rise in the coming months.
Owning a home provides one of the strongest foundations for building individual wealth and lasting financial security. If you’re ready to start your path towards homeownership, let’s connect today.
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There are many non-financial benefits of buying your own home. However, today’s headlines seem to be focusing primarily on the financial aspects of homeownership – specifically affordability. Many articles are making the claim that it’s not affordable to buy a home in today’s market, but that isn’t the case.
Today’s buyers are spending approximately 20% of their income on their monthly mortgage payments. According to The Essential Guide to Creating a Homebuying Budget from Freddie Mac, the 20% of income that purchasers are currently paying is well within the 28% guideline suggested:
“Most lenders agree that you should spend no more than 28% of your gross monthly income on a mortgage payment (including principal, interest, taxes and insurance).”
So why is there so much talk about challenges regarding affordability?
Since home prices are rising, it’s true that homes are less affordable than they have been since the housing crash fifteen years ago. Headlines making these claims aren’t incorrect; they just don’t tell the whole story. To paint the full picture, you have to look at how today stacks up with historical data. A closer analysis of affordability going further back in time reveals that homes today are more affordable than any time from 1975 to 2005.
Despite that, the chatter about affordability is pushing some buyers to the sidelines. They don’t feel comfortable knowing someone else got a better deal a year ago.
In a recent post, Odeta Kushi, Deputy Chief Economist at First American, offers a different take on the financial components of housing affordability. Kushi proposes we should at least consider the impact equity build-up has on the affordability equation, stating:
“For those trying to buy a home, rapid house price appreciation can be intimidating and makes the purchase more expensive. However, once the home is purchased, appreciation helps build equity in the home, and becomes a benefit rather than a cost. When accounting for the appreciation benefit in our rent versus own analysis, it was cheaper to own in every one of the top 50 markets.”
Let’s look at an example. In the above-mentioned post, Kushi examines the rent versus buy situation in Dallas, Texas. Kushi chose Dallas because home prices there sit near the median of the top 50 markets in the nation.
Kushi first calculates the monthly mortgage payment on a median-priced home with a 5% down payment and a mortgage rate of 3% (see chart below):
Kushi then takes the monthly cost and subtracts the appreciation the home had over the previous twelve months. The average house price in Dallas increased 17.5% in the second quarter of 2021 compared to last year (this is in line with the national pace). That equates to an equity benefit of approximately $3,550 each month if the pace remains the same (see chart below):
We can see the equity gained each month was greater than the monthly mortgage payment, resulting in a negative cost to own. The buyer could build their net worth by $1,830 each month – after paying their mortgage.
Kushi then compares the monthly cost of owning to the cost of renting (see chart below):
When adding equity build-up into the equation, the cost of renting is $3,140 more expensive than owning. Again, the First American analysis shows that it’s less expensive to own in each of the top 50 markets in the country when including the equity component.
If you’re on the fence about whether to buy or rent right now, let’s connect so we can determine if the equity increase in our local market should impact your decision.
Maybe with the leverage you currently have, you can negotiate a deal that will allow you to make the move of your dreams.
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If you’re trying to decide whether or not to sell your house, this is the time to think seriously about making a move. Fannie Mae’s recent Home Purchase Sentiment Index (HPSI) reveals the number of respondents who say it’s a good time to sell is higher now than it was over the past few summers (see graph below). Today, the majority of consumers, 75 percent, say it’s a good time to sell a house.
The higher good time to sell sentiment has to do with today’s market conditions, specifically low housing supply and high buyer demand. In the simplest terms, we don’t have enough houses available for sale to meet buyer demand.
According to the latest data from the National Association of Realtors (NAR), we’re still firmly in a sellers’ market because housing supply is well below a balanced norm (shown in the graph below).
Clearly, the scales are tipped in a seller’s favor today. But while housing supply is undeniably low, the right side of the graph shows how the inventory situation is improving little by little each month as more sellers list their homes for sale.
As a seller, that means each month, buyers have more options to pick from. By extension, that means your house may get less buyer attention with time. Danielle Hale, Chief Economist for realtor.com, explains it like this:
“More homeowners continue to list homes for sale compared to a year ago… Notably, while new listings continue to lag behind a more ‘normal’ 2019 pace, the gap is shrinking. Even though homes continue to sell quickly thanks to high demand and limited supply, new listings are subtly shifting the balance of market conditions in favor of buyers.”
If you’ve been waiting for the perfect time to sell, there may not be a better chance than right now. Inventory is gradually increasing each month, so selling sooner rather than later will help you maximize your home’s potential.
If you’re planning to sell your house, 2021 is still the year to do it. The unique mix of low supply and high demand won’t last forever. Let’s connect to discuss what you need to do now to sell your house and take advantage of this sellers’ market.
Maybe with the leverage you currently have, you can negotiate a deal that will allow you to make the move of your dreams.
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Mortgage rates are hovering near record lows, and that’s good news for today’s homebuyers. The graph below shows mortgage rates dating back to 2016 and where today falls by comparison.
Generally speaking, when rates are low, you can afford more home for your money. That’s why experts across the industry agree – today’s low rates present buyers with an incredible opportunity. Here’s what they have to say:
“As the economy works to get back to its pre-pandemic self, and the fight against COVID-19 variants unfolds, owners and buyers continue to benefit from some of the lowest mortgage rates of all-time.”
“Mortgage rates are generally the same across the country, so a decline in mortgage rates boosts affordability equally in each market.”
“Those who haven’t yet taken advantage of low rates to buy a home or refinance still have the opportunity to do so this summer.”
Hale goes on to say that buyers who don’t act soon could see higher rates in the coming months, negatively impacting their purchasing power:
“We expect mortgage rates to fluctuate near historic lows through the summer before beginning to climb this fall.”
And while mortgage rates are still low today, the data from Freddie Mac indicates rates are fluctuating ever so slightly right now, as they moved up one week before inching slightly back down in their latest release. It’s important to keep in mind the influence rates have on your monthly mortgage payment.
Even small increases can have a big impact on what you pay each month. Trust the experts. Today’s rates give you opportunity and flexibility in what you can afford. Don’t wait on the sidelines and hope for a better rate to come along; the rates we’re seeing today are worth capitalizing on.
Mortgage rates hover near record lows today, but experts forecast they’ll rise in the coming months. Waiting could prove costly when that happens. Let’s connect today to discuss today’s rates and determine if now’s the time for you to buy.
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The August 2021 Housing Market Update, hosted by Geoff Green, was held on August 7 at 12 p.m. One focus of the webinar was the possibility of a housing bust, with the market imploding. The overall consensus is that it is not going to happen. Geoff presented several reasons why it won’t, including this quote from Dr. Frank Nothaft, Chief Economist at CoreLogic:
“There are marked differences in today’s run-up in prices compared to 2005, which was a bubble fueled by risky loans and lenient underwriting. Today, loans with high-risk features are absent and mortgage underwriting is prudent.”
The entire presentation is available below if you missed the live webinar or would like to watch it again,
The original projection of forbearance was 30%. It has been nowhere near that. Today the actual percentage is 3.5%. The number of mortgages in active forbearance is now under 2 million.
44.1% of those in forbearance have paid in full. Another 38.7% worked out repayment plans. However, 17.2% have remained in trouble. Because of the inventory shortage, foreclosures through the forbearance program could easily be absorbed by the market.
We’re starting to see headlines in news media:
“Home sales drop in June as prices continue to rise.” CNN
“Pending home sales drop in June – more evidence of a housing turnaround.” CNBC”
“The Housing Boom is officially over.” YahooFinance
According to the ShowingTime Index, in June there was more showing traffic than at any time in 2020.
While the fever pitch of the market is fading, the market is still extremely strong. The sellers’ market does not appear to be ending any time soon. And, the main reason? Lack of inventory. However, sellers must be careful in how they price their homes. According to Lawrence Yun, Chief Economist, NAR,
“… given that the sales activities are coming down, we may be sensing some turn in the market. We are seeing less prevalence of multiple offers. It is still a seller’s market, no doubt… Still a seller’s market, but people need to be very cautious how they price their home to attract buyers. knowing that these sales activities are declining somewhat.”
Year-over-year existing home sale numbers are similar to those of past years. However, the average home sale price is much higher than any year since 2017. Months supply of inventory is still extremely low. There are many people who bought homes during the pandemic and have since been called back to work in cities. Some of them may find the commute too difficult and put those homes on the market.
Two very experienced realtors joined Geoff Green for the panel discussion. Keren Gonen, Green Team New Jersey Realty. operates in the New York metro area, North Jersey. Realtor Pete Galyon, United Real Estate Experts, is based in Chattanooga, Tennessee. They discussed the softening of the market and a return to “normalcy.” They also discussed the importance of using an experienced local realtor for both buyers and sellers.
To view the entire presentation and panel discussion, click here.
There’s a common misconception that younger generations aren’t interested in homeownership. Many people point to the fact that millennials put off purchasing their first home as a reason for this belief.
Odeta Kushi, Deputy Chief Economist for First American, explains why millennials have put off certain milestones linked to homeownership. Those delays led to their homeownership rates trailing slightly behind older generations:
“Historically, millennials have delayed the critical lifestyle choices often linked to buying a first home, including getting married and having children, in order to further their education. This is clear in cross-generational comparisons of homeownership rates which show millennials lagging their generational predecessors.”
So, it’s partially true that some millennials have waited on homeownership to focus on other things in their lives – and that’s impacting certain housing market trends.
Data from the National Association of Realtors (NAR) indicates the average age of a first-time homebuyer is higher today than it’s been over the past 40 years. As the graph below shows, homebuyers today are purchasing their first home an average of 4 years later than people in the 1980s and early 1990s:
But just because millennials are hitting certain milestones later in life doesn’t mean they’re not interested in becoming homeowners. The recent U.S. Census reveals a significant increase in homeownership rates for millennials and other young homebuyers.
As the graph above shows, millennials are entering the market in full force, and their share of the market is growing. Based on the data, the belief that younger generations don’t want to buy homes is a misconception. In fact, the recent Capital Market Outlook report from Merrill-Lynch further drives home this point, as it specifically mentions the effect millennials are having on demand:
“Demand is very strong because the biggest demographic cohort in history is moving through the household-formation and peak home-buying stages of its life cycle.”
Kushi is following the trend of millennial homeownership and puts it more simply, saying:
“. . . it’s clear that younger households (millennials!) are driving homeownership growth.”
As the largest generation, millennials’ impact on the market is growing as more and more people from that generation reach homebuying age – and Generation Z isn’t far behind, either. That means younger generations will likely continue to drive demand in the housing market for years to come.
If you’re a member of a younger generation and interested in purchasing a home, you’re not alone. Many of your peers are on their path to homeownership, too. Let’s connect today and discuss what you can do to accomplish your homebuying goals.
Contact one of Our Agents today!
See out Complete Inventory of Available Properties!
Maybe with the leverage you currently have, you can negotiate a deal that will allow you to make the move of your dreams.
What’s your home’s value?
The Green Team 2021 Summer Social was about more than getting together and having a good time. It was also about having fun with a purpose. For many, this occasion marked the first time they had been able to socialize in a long time. There was a lot to talk about and catch up on. Therefore, Green Team Sales Associates, their families, and invited guests enjoyed a beautiful day together at lovely Spring Brook Farm in Warwick. Of course, the food was great! Furthermore, there was even a signature green cocktail. And, many stayed to watch the magnificent sunset and enjoy smores at the firepit. However, the occasion also included fun for an important purpose, and Green Teamers came through for a special cause…
Team Up for Hope, a non-profit organization founded by Geoff Green and Amy Green, was that cause. Its goal is to address the challenges of mental health, drug use, and suicide in our communities. This all-volunteer organization is currently made up of a small group of Green Team Sales Associates and Staffers. And, to raise money for TUH, Keren Gonen and Tiffany Megna manned the t-shirt table. Furthermore, they sold tickets for a 50/50 raffle, However, one of the main draws of the day was Dunking Geoff. Yes, the president of Green Team Realty and founder of Team Up for Hope, volunteered to get dunked! A donation of $10 got you three throws. Finally, at the end of the day, Geoff had been dunked several times, and the Green Team 2021 Summer Social raised $740 for Team Up for Hope.
Keren Gonen and Tiffany Megna at the Team Up for Hope table
Pip Klein is first up to Dunk Geoff
Team Up for Hope provides donations to NAMI (National Alliance on Mental Illness) local chapters in Orange and Sussex Counties. NAMI, an all-volunteer organization, provides peer support, education, and resources to individuals and families whose lives are impacted by mental health diagnoses. TUH makes donations to other local non-profit organizations that share their time and knowledge to help meet the challenges of mental health, drug use, and suicide.
We were honored to have Dhanu Sannesy, President of NAMI Orange, and Mary Anne McInerney, President of NAMI Sussex in attendance. Dhanu addressed the crowd. She told them how much the support that Team Up for Hope provides means to her organization. In addition, TUH produces webinars that address various aspects of mental health, drug use, and suicide. And, while many of the resources shared are for local organizations, the topics covered are global in content, touching on the very real challenges that impact individuals and families living with these challenges.
Geoff Green with Dhanu Sannesy, President of NAMI Orange
Dhanu Sannesy, Wayne Patterson, and Mary Anne McInerney
We would not be able to do events like the Green Team Summer Social without the generous support of our sponsors. They are:
We appreciate the services of the local businesses and vendors that helped to make the 2021 Summer Social a big success:
Here are some moments from the Green Team 2021 Summer Social. We are all looking forward to the next time we’re able to get together like this.
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