Homeownership is a Cornerstone of the American Dream

“The rumors of my death are greatly exaggerated.” The famous quote attributed to Mark Twain can apply to homeownership in the United States today. During the housing bubble of the last decade, the homeownership rate soared to over sixty-nine percent. After the crash, that percentage continued to fall for the next ten years. That led to speculation that homeownership was no longer seen as a major component of the American Dream. That belief became so widespread that the term “renters’ society” began to be used by some to define American consumers. However, the latest report by the Census Bureau on homeownership shows that over the last two years, the percentage of homeowners has increased in each of the last eight quarters. Going forward… It appears the homeownership rate will continue to increase. The 2019 Aspiring Home Buyers Profile recently released by the National Association of Realtors revealed that 84% of non-owners want to own a home in the future. That percentage increased from 73% earlier last year. Bottom Line In the United States, the concept of homeownership as part of the American Dream is very much alive and well.

What are the Benefits of Becoming a Homeowner?

Every family has a list of important dates. We celebrate birthdays, anniversaries, pet adoptions…and the list goes on. For 64.4 percent of households in the United States, this list includes the day they became a homeowner for the first time! Why is this date important? Homeownership is not just a roof over your head! It represents shelter, stability, wealth, and pride! For decades, homeownership has been an important part of the American Dream! However, many question if the next generations see the same benefits of homeownership as their predecessors. In case we have forgotten, some of those benefits are: Non-Financial Benefits Educational Achievement: Homeownership has a positive impact on academic achievement, including reading and math performance in children 3-12 years old. Civic Participation: “Owning a home means owning a part of the neighborhood.” Homeowners have a stronger connection to their neighborhood and are more committed to volunteer. Health Benefits: Adjusting for a range of demographic, socioeconomic and housing-related characteristics, homeowners have a substantial health advantage over renters. Public Assistance: The report shows 47% of homeowners use their home equity credit lines to help pay other debts, diminishing their need for public assistance. Property Maintenance and Improvement: A well-maintained home not only generates benefits through consumption and safety, but a high-quality structure also raises mental health. Pride of Ownership: This place is uniquely “yours.” You can customize it according to your likes and personality. In addition to financial benefits, homeownership also brings significant social benefits. These not only pertain to the…

How Can I Increase My Family’s Net Worth?

Every three years, the Federal Reserve conducts their Survey of Consumer Finances. Data is collected across all economic and social groups. The latest survey data covers 2013-2016. The study revealed that the median net worth of a homeowner is $231,400 – a 15% increase since 2013. At the same time, the median net worth of renters decreased by 5% ($5,200 today compared to $5,500 in 2013). These numbers reveal that the net worth of a homeowner is over 44 times greater than that of a renter. Owning a home is a great way to build family wealth. As we’ve said before, simply put, homeownership is a form of ‘forced savings.’ Every time you pay your mortgage, you are contributing to your net worth by increasing the equity in your home. That is why Gallup reported that Americans picked real estate as the best long-term investment for the fifth year in a row. According to this year’s results, 34% of Americans chose real estate. Stocks followed at 26%, and then gold, savings accounts/CDs, or bonds. Bottom Line If you want to find out how you can use your monthly housing cost to increase your family’s wealth, let’s get together to guide you through the process.

Why A Normal Market is Just What We Need

The housing market has been hot for a while now. Homes have been flying off the shelves as fast as they have been listed. Buyers have been competing in bidding wars just to find a home to buy, let alone find their dream home. This ‘seller’s market’ has driven home prices to new heights. Home price appreciation averaged over 6% across the country. However, home price growth has recently started to cool down. The latest report from CoreLogic shows that home prices have only risen by 4.7% over the last 12 months. Many buyers and sellers planning to enter the housing market this year have started to wonder if we are headed towards another housing crash. Ralph McLaughlin, Deputy Chief Economist at CoreLogic, recently stated in an interview, “There’s no reason to panic right now, even if we may be headed for a recession. We’re seeing a cooling of the housing market, but nothing that indicates a crash. The real elephant in the room here is housing supply.” The simple answer is we are returning to a ‘normal’ market. The inventory of homes for sale more closely matches the demand in the market. The added supply means fewer buyers are outbidding each other. Therefore, prices are experiencing less upward pressure. McLaughlin went on to explain, “If there are a lot of homes on the market and suddenly no one wants to buy them, you’ll get into a downward spiral of price competition. Right now, however, we’re in the opposite situation,…

Millionaire To Millennials: Don’t Get Stuck Renting A Home… Buy One!

In a CNBC article, self-made millionaire David Bach explained that: “The biggest mistake millennials are making is not buying their first home.” He goes on to say that, “If you want to build real financial security, real wealth for your lifetime, then you need to buy a home.” Bach went on to explain: “Homeowners are worth 40 times more than renters. Now, that first home doesn’t need to be a dream home, it can be a very small home. You might literally have to buy a small studio apartment, but that’s how you get started.” Then he explains the secret to buying that home! “Don’t do a 30-year mortgage. You want to take that 30-year mortgage and instead pay it off early, do a 15-year mortgage. What happens if you do a 15-year mortgage? Well, one, you pay the mortgage off 15-years sooner, that means you’ll be able to retire in your fifties. Number two, you’ll save a fortune (on potentially hundreds of thousands of dollars in interest payments).” What will it cost to pay your mortgage in fifteen years? He explains further: “For fifteen years, you got to brownbag your lunch. Think about that! Brownbag your lunch literally for fifteen years. You can retire ten years sooner than your friends. You’ll have real wealth, because you bought a home – you’re not a renter. And you’ll be financially secure for life.” Bottom Line Whenever a well-respected millionaire gives investment advice, people usually clamor to hear it. This millionaire gave…

Why Homeownership Matters Now More Than Ever

Study after study shows that no matter what generation Americans belong to, the vast majority believe that homeownership is an important part of their American Dream. The benefits of homeownership can be broken into two main categories: financial and non-financial (often referred to as emotional or social reasons.) For Americans approaching retirement age, one of the greatest benefits to homeownership is the added net worth they have been able to achieve simply by paying their mortgage! The Joint Center for Housing Studies at Harvard University focused on homeowners and renters over the age of 65. Their study revealed that the difference in net worth between homeowners and renters at this age group was actually 47.5 times greater, with nearly half their net worth coming from home equity! Homeowners over the age of 65 are much more financially prepared for retirement and often own their homes outright if they were fortunate enough to purchase their homes before the age of 36. Their 30 years of mortgage payments have paid off as they gained equity through their monthly payments and as home values appreciated. It is no surprise that lifelong renters have had a hard time accruing net worth as the latest Census report shows that the Median Asking Rent has been climbing consistently over the last 30 years. Bottom Line Your monthly mortgage payment is a form of ‘forced savings’ building your net worth with every payment!

Whose Mortgage Do You Want to Pay? Yours or Your Landlord’s?

There are some people who haven’t purchased homes because they are uncomfortable taking on the obligation of a mortgage. However, everyone should realize that unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s. As Entrepreneur Magazine, a premier source for small business explained in their article, “12 Practical Steps to Getting Rich”: “While renting on a temporary basis isn’t terrible, you should most certainly own the roof over your head if you’re serious about your finances. It won’t make you rich overnight, but by renting, you’re paying someone else’s mortgage. In effect, you’re making someone else rich.” With home prices rising, many renters are concerned about their house-buying power. Mike Fratantoni, Chief Economist at MBA, explained: “The spring homebuying season is almost upon us, and if rates stay lower, inventory continues to grow, and the job market maintains its strength, we do expect to see a solid spring market.” As an owner, your mortgage payment is a form of ‘forced savings,’ which allows you to build equity in your home that you can tap into later in life. As a renter, you guarantee the landlord is the person building that equity. As mentioned before, interest rates are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac’s latest report shows that rates across the country were at 4.46% last week. Bottom Line Whether you are…

Don’t Get Caught in the Rental Trap in 2019

Every year around this time, we take time to reflect and plan for next year. If you are renting your current home but have dreams of homeownership, your plan for the new year may include buying, and you wouldn’t be alone! According to the 2018 Bank of America Homebuyer Insights Report, 74% of renters plan on buying in the next 5 years, with 38% planning to buy in the next 2 years! When those same renters were asked why they disliked renting, 52% said that rising rental costs were their top reason, and 42% of renters believe that their rent will rise every year. The full results of the survey can be seen below: It’s no wonder that rising rental costs came in as the top answer! The median asking rent price has risen steadily over the last 30 years, as you can see below! There is a long-standing rule that a household should not spend more than 28% of its income on housing expenses. With nearly half of renters (48%) surveyed already spending more than that, and with their rents likely to rise again… why are they renting? When asked why they haven’t purchased a home yet, not having enough saved for a down payment (44%) came in as the top response. The report went on to reveal that nearly half of all respondents believe that “a 20% down payment is required to buy a home.” If the majority of those who believe they haven’t saved a large enough…

Homeowners Aged 65+ Have 48x More Net Worth Than Renters

Every three years, the Federal Reserve conducts their Survey of Consumer Finances in which they collect data across all economic and social groups. Their latest survey data covers responses from 2013-2016. The study revealed that the median net worth of a homeowner was $231,400 – a 15% increase since 2013. At the same time, the median net worth of renters decreased by 5% ($5,200 today compared to $5,500 in 2013). These numbers reveal that the net worth of a homeowner is over 44 times greater than that of a renter. There are many who see that statistic and point toward how broad the range of respondents are for the Federal Reserve survey. Their study includes all economic and social groups and also includes all age groups. The argument is that older respondents have a higher likelihood of being homeowners, while the homeownership rate among younger survey takers is much lower. Recently, the Joint Center for Housing Studies at Harvard University focused on homeowners and renters over the age of 65. Their study revealed that the difference in net worth between homeowners and renters at this age group was actually 47.5 times greater! Homeowners over the age of 65 are much more financially prepared for retirement and often own their homes outright if they were fortunate enough to purchase their homes before the age of 36. Their 30 years of mortgage payments have paid off as they gained equity through their monthly payments and as home values appreciated. It is no surprise that lifelong-renters have…

75% of Renters Have Been Misinformed

Recently, multiple headlines have been written asserting that homeownership is less affordable today than at any other time in the last decade. Though the headlines are accurate, they lack context and lead too many Americans to believe that they can’t partake in a major part of the American Dream – owning a home. In 2008, the housing market crashed and home values fell by as much as 60% in certain markets. This was the major trigger to the Great Recession we experienced from 2008 to 2010. To come back from that recession, mortgage interest rates were pushed down to levels that were never seen before. For the last ten years, you could purchase a home at a dramatically discounted price and attain a mortgage at a historically low mortgage rate. Affordability skyrocketed. Now that home values have returned to where they should be, and mortgage rates are beginning to increase, it is less affordable to own a home than it was over the last ten years. However, what is not being reported is that it is MORE AFFORDABLE to own a home today than at any other time since 1985 (when data was first collected on this point). If you take out the years after the crash, affordability today is greater than it has been at almost any time in American history. This has not been adequately reported which has led to many Americans believing that they cannot currently afford a home. As an example, the latest edition of Freddie…