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Buying a home is a powerful decision, and it remains at the heart of the American Dream. Unlike renting, owning a home means more than just having a place to live – it offers a sense of belonging, stability, and freedom. According to Nicole Bachaud, Senior Economist at Zillow:
“The American Dream is still owning a home. There’s a lot of pent-up demand for ownership; that isn’t going to go away.”
Let’s explore just a few of the reasons why so many Americans continue to value homeownership.
One possible reason homeownership is viewed so highly is because owning a home is a significant wealth-building tool. That may be why Jessica Lautz, Deputy Chief and VP of Research at the National Association of Realtors (NAR), says:
“Homeownership is the number one way to build wealth in America.”
Over time, owning a home not only helps boost your own net worth, but it also sets future generations up for success as you pass that wealth down. Habitat for Humanity explains:
“Overall, homeownership promotes wealth building by acting as a forced savings mechanism and through home value appreciation. Homeowners make monthly payments that increase their equity in their homes by paying down the principal balance of their mortgage. . . . In addition, owning a home promotes intergenerational homeownership and wealth building. Children of homeowners transition to homeownership earlier — lengthening the period over which they can accumulate wealth . . .”
It can also provide meaningful financial stability compared to renting. When you buy with a fixed-rate mortgage, you can lock in your monthly housing payments for the length of your home loan.
But, owning a home offers more than just financial benefits—it benefits you socially and emotionally too. Your home provides feelings of achievement, responsibility, and more. In a recent survey, Fannie Mae outlines just a few of these more emotionally-driven benefits, including:
“The top three were having control over what you do with your living space (94%) to having a sense of privacy and security (91%) and having a good place for your family or to raise your children (90%) . . .”
If your idea of the American Dream involves greater freedom, security, and prosperity, homeownership could be a key player in bringing that dream to life. And with mortgage rates now on a downward trend, it might be a good time for you to consider making a move.
If you’re ready and able to buy, know that there are incredible benefits waiting at the end of your journey. You’ll gain more than just a home – it’s a place to grow your wealth and call your very own. Like Ksenia Potapov, Economist at First American says:
“…homeownership remains an important driver of wealth accumulation and the largest source of total wealth among most households.”
Buying a home is a powerful decision and the cornerstone of the American Dream. If finding a place to call your own is part of your dream for this year, let’s connect to start the process today.
If you’re trying to decide whether to rent or buy a home this year, here’s a powerful insight that could give you the clarity and confidence you need to make your decision.
Every three years, the Federal Reserve releases the Survey of Consumer Finances (SCF), which compares net worth for homeowners and renters. The latest report shows the average homeowner’s net worth is almost 40X greater than a renter’s (see graph below):
One reason a wealth gap exists between renters and homeowners is because when you’re a homeowner, your equity grows as your home appreciates in value and you make your mortgage payment each month. When you own a home, your monthly mortgage payment acts like a form of forced savings, which eventually pays off when you decide to sell. As a renter, you’ll never see a financial return on the money you pay out in rent every month. Ksenia Potapov, Economist at First American, explains it like this:
“Renters don’t capture the wealth generated by house price appreciation, nor do they benefit from the equity gains generated by monthly mortgage payments . . .”
Home equity does more to build the average household’s wealth than anything else. According to data from First American and the Federal Reserve, this holds true across different income levels (see graph below):
The green segment in each bar represents how much of a homeowner’s net worth comes from their home equity. Based on this data, it’s clear no matter what your income level is, owning a home can really boost your wealth. Nicole Bachaud, Senior Economist at Zillow, shares:
“The biggest asset most people are ever going to own is a home. Homeownership is really that financial key that helps unlock stability and wealth preservation across generations.”
If you’re ready to start building your net worth, the current real estate market offers several opportunities you should consider. For example, with mortgage rates trending lower lately, your purchasing power may be higher now than it has been in months. And, with more inventory coming to the market, there are more options for you to consider. A local real estate agent can walk you through the opportunities you have today and guide you through the process of finding your ideal home.
If you’re unsure about whether to rent or buy a home, keep in mind that owning a home can increase your overall wealth in the long run, no matter your income. To discover more about this and the many other benefits of homeownership, let’s connect.
If you’ve owned your house for at least a couple of years, there’s something you’re going to want to know more about – and that’s home equity. If you’re not familiar with that term, Freddie Mac defines it like this:
“. . . your home’s equity is the difference between how much your home is worth and how much you owe on your mortgage.”
That means your equity grows as you pay down your home loan over time and as home values climb. While it’s true home prices dipped slightly last year, they rebounded and have been climbing in many areas since then. Here’s why that price growth is good news for you.
In the latest Equity Insights Report, Selma Hepp, Chief Economist at CoreLogic, explains:
“With price gains continuing to help homeowners build wealth, equity has reached a new high and regained losses that resulted from declines last year. And while the average U.S. homeowner gained over $20,000 in additional equity compared with the third quarter of 2022, some markets are seeing larger increases as price growth catches up.”
And that figure is just for the last year. To help you really understand how that number can add up over time, the report also says the average homeowner with a mortgage has more than $300,000 in equity. That much equity can have a big impact.
Here are a few examples of how you can put your home equity to work for you.
If your current space no longer meets your needs, it might be time to think about moving to a bigger home. And if you’ve got too much space, downsizing to a smaller one could be just right. Either way, you can put your equity toward a down payment on something that fits your changing lifestyle.
And, if you’re not ready to move just yet, you can use the equity you have to improve your current home. But it’s important to consider the long-term benefits certain upgrades can bring to your home’s value. A real estate agent is a great resource on which projects to prioritize to get the greatest return on your investment when you sell later on.
Home equity can also serve as a catalyst for realizing your life-long dreams. That could mean investing in a new business venture, retirement, or funding an education. While you shouldn’t use your equity for unnecessary spending, using it responsibly for something meaningful and impactful can really make a difference in your life.
While the number of foreclosure filings remains below the norm, there are still some homeowners who go into foreclosure each year. If you’re in a tough spot financially, having a clear understanding of your options can help. Equity can act as a cushion if you’re not able to make your mortgage payments on time.
If you want to know how much equity you have in your home, let’s connect. That way you have someone who can do a professional equity assessment report on how much you’ve built up over time. Then let’s talk through how you can use it to help you reach your goals.
If you want to buy a home, it’s important to know how mortgage rates impact what you can afford and how much you’ll pay each month. Fortunately, rates for 30-year fixed mortgages have come down significantly since the end of October and are currently under 7%, according to Freddie Mac (see graph below):
This recent trend is great news for buyers. As a recent article from Bankrate says:
“The rate cool-off somewhat eases the housing affordability squeeze.”
And according to Edward Seiler, AVP of Housing Economics and Executive Director of the Research Institute for Housing America at the Mortgage Bankers Association (MBA):
“MBA expects that affordability conditions will continue to improve as mortgage rates decline . . .”
Here’s a bit more context on how this could help with your plans to buy a home.
Understanding the connection between mortgage rates and your monthly home payment is crucial for your plans to become a homeowner. The chart below illustrates how your ability to afford a home changes when mortgage rates shift. Imagine your budget allows for a monthly payment between $2,400 and $2,500. The green part in the chart shows payments in that range or lower (see chart below):
As you can see, even small changes in rates can affect your budget and the loan amount you can afford.
When you’re looking to buy a home, it’s important to get guidance from a local real estate agent and a trusted lender. They can help you explore different mortgage options, understand what makes mortgage rates go up or down, and how those changes impact you.
By looking at the numbers and the latest data together, then adjusting your strategy based on today’s rates, you’ll be better prepared and ready to buy a home.
If you’re looking to buy a home, you should know the recent downward trend in mortgage rates is good news for your move. Let’s connect and plan your next steps.
If you’re following the news today, you may feel a bit unsure about what’s happening with home prices and fear whether or not the worst is yet to come. That’s because today’s headlines are painting an unnecessarily negative picture. If we take a year-over-year view, home prices did drop some, but that’s because we’re comparing to a ‘unicorn’ year when prices peaked well beyond the norm.
To avoid an unfair comparison to that previous peak, we need to look at monthly data. And that tells a very different and much more positive story. While local home price trends still vary by market, here’s what the national data tells us.
The graphs below use recent monthly reports from three sources to show the worst home price declines are already behind us, and prices are appreciating nationally.
Looking at this monthly view, we can see the past year in the housing market can be divided into two parts. In the first half of 2022, home prices were going up, and fast. However, starting in July, prices began to go down (shown in red in the graphs above). By around August or September, the trend started to stabilize. But, looking at the most recent data for early 2023, these graphs also show that prices are going up again.
The fact that all three reports show prices have been going up for three or more straight months is an encouraging sign for the housing market. The month-over-month data indicates a national shift is happening – home prices are rising again.
Craig J. Lazzara, Managing Director at S&P Dow Jones Indices, says this about home price trends:
“If I were trying to make a case that the decline in home prices that began in June 2022 had definitively ended in January 2023, April’s data would bolster my argument.”
Experts believe one of the reasons prices didn’t crash like some expected is because there aren’t enough available homes for the number of people who want to buy them. Even with today’s mortgage rates, there are more people looking to buy than there are homes available for sale.
Mark Fleming, Chief Economist at First American, explains how more demand than supply keeps upward pressure on prices:
“History has shown that higher rates may take the steam out of rising prices, but it doesn’t cause them to collapse entirely. This is especially true in today’s housing market, where the demand for homes continues to outpace supply, keeping the pressure on house prices.”
Doug Duncan, Senior VP and Chief Economist at Fannie Mae, states home price growth is exceeding expectations thanks to that high demand:
“. . . housing prices continue to show stronger growth than what was previously expected . . . Housing’s performance is a testimony to the strength of demographic-related demand . . .”
If you delayed your moving plans because you were concerned about home prices dropping, the latest data reveals the worst is already over, and prices are appreciating nationally. Let’s get in touch so you know what’s happening with home prices in our area.