A substantial majority of both home owners and current renters agree that owning a home is a smart decision over the long term. That’s according to the results of a National Association of Realtors® survey of 3,793 adults conducted online by Harris Interactive.
The American Attitudes About Homeownership survey found that in today’s challenging economy, 95 percent of owners and 72 percent of renters believe that over a period of several years, it makes more sense to own a home. In addition, an overwhelming majority of home owners are happy with their decision to own a home – 93 percent of owners surveyed would buy again.
“Home owners and renters agree that home ownership benefits individuals and families, strengthens our communities, and is integral to our nation’s economy,” said National Association of Realtors® President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. “The results of this survey illustrate just how important issues related to home ownership are to people in this country.”
The survey uncovered some differences between home owners and renters, as well. While more than half of owners are “very” or “extremely” satisfied with the overall quality of their family life, only one-third of renters report the same levels of satisfaction. Similarly, 43 percent of home owners are very/extremely satisfied with their community life, compared with 30 percent of renters.
A majority of renters – 63 percent – said that it was at least somewhat likely that they would purchase a home at some point in the future. Among this group, young adults (18-29 years old) have the strongest aspirations for home ownership; only 8 percent of young adults said that it was “not at all likely” that they would purchase a home at some point in the future.
In today’s market, many aspiring home owners are faced with worries about job security and creditworthiness. Among renters who are very or extremely likely to buy a home in the future, three out of five consider confidence in job security and creditworthiness to be an obstacle.
One point of agreement between renters and home owners was support of the mortgage interest deduction (MID). Seventy-four percent of owners and 62 percent of renters say it’s “extremely” or “very” important that the MID remain in place.
“At a time when the middle class is under increasing economic pressures, both home owners and renters agree that the mortgage interest deduction should not be targeted for change,” said Phipps. “Given strong public support of and aspirations toward owning a home, we need to keep policies in place that support and encourage responsible, sustainable home ownership for our future.”
This survey was conducted online within the U.S. and fielded October 6-20, 2010. A total of 3,793 adults, 18 and older were surveyed, including 1,880 home owners, 1,115 renters, and 798 young adults. All samples came from the Harris Poll online database and were weighted for age, sex, race/ethnicity, education, region and household income to be representative of the U.S. general population of adults 18 and older. Propensity score weighting was also used to adjust for respondents’ propensity to be online. Results are available online at www.realtor.org/statsanddata/homeownership/attitudes_homeown.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
How Much Home Can I Afford?
Home prices skyrocketed in the early 2000's, with things really heating up between 2005 and 2007. According to the New York Times, HUD conducted a survey in 2007, finding that home values had risen 16 percent in just those two years. The housing bubble burst in the Spring of 2007 and markets tanked.
Now house values are resetting, with some areas still experiencing declines. In high boom areas, such as Florida, Arizona, and California, homes are having to correct from staggering rises of 20, 30 and even 40 percent in home values. This means values rose, and millions of homeowners bought at the top of the market, now finding themselves upside down in their loans.
Despite the crisis, there are still buyers on the market. But many are wary to make a mistake of buying a home they can't pay for. How much home can you really afford? Home affordability, in general, is dependant on a range of factors. These include:
Employment status: Do you have a stable job and income? Lenders will want to know if they can rely on you to make monthly payments for many years to come. With an unemployment rate near 10 percent, it's no wonder a record number of homes are currently in foreclosure. Another way lenders assess your risk is by examining your credit score.
Credit Score: Over your adult life you have been building up a credit score. Every card and loan you have opened has figured into a 3 digit number from 300 - 850. The higher your number, the less "risk" you are perceived to be, and thus, the more likely you'll be extended higher sums of credit for a lower rate. Car loans, student loans, home loans, credit cards, and personal loans. How faithfully you've repaid them, and how many of them you have open, dictates your score.
Number of Dependants: Do you have children or aging parents for whom you are financially responsible? If so, consider medical bills, schools tuition, and daycare when calculating a reasonable budget.
Desired Location: A 2,000 square foot home in rural Nebraska costs dramatically less than the same 2,000 square foot home in the heart of New York City. Prices even range widely by suburb and neighborhood.
Savings: You will need money for a downpayment. Financial Expert Suze Orman recommends you put at least 20 percent down. That means on a $200,000 house, for example, you should have $40,000 in cash to put down. You will also need additional cash for closing costs, as well as repairs and maintenance that are inevitable with homeownership.
Emergency Fund: Do you have a separate savings account worth 8 months of bills? You must have an emergency fund. Just ask the 15 million unemployed. Things do and will happen. If you don't have this fund, you can't afford a house. You may be able to "borrow" money for a house ... but in reality you really can't afford one.
Interest Rates: Interest rates are at historical lows. At this writing, the 30-year fixed rate mortgage is 4.74 percent. To put this in perspective, rates in the 1980's were anywhere from 13 to 18 percent. This means big savings if you are in the position to buy.
Monthly Payments: If you have ever bought a car, one of the first things a salesman will ask you is, "Where do you want your monthly payment to be?" It's all about rates and downpayments with lenders. Yes, it is important that your monthly mortgage payment is no more than 1/3 of your monthly income, but don't be coaxed into buying a home you can't really afford just because the monthly payments are appealing (hello, subprime mortgage crisis).
Now, all that said, this next idea may seem a bit radical for some of you. There is a movement among some Americans to not only reduce their debt, but to get completely out from under it. This translates implicitly into the home buying process.
We have become a nation increasingly driven by the bigger and better. Need we say more than "McMansions." It is a culture of debt, where even the national government owes $14 trillion. And no, not every country has national debt. The United States, though, leads the way.
So, what if you could buy a much smaller house, or a house in a much less prominent neighborhood, and avoid a mortgage payment altogether?
The idea is nearly unheard of in this country. But it could be one that will begin to gain ground as many families struggle to makes ends meet, and even more families learn the hard lesson about home affordability. The truth of the matter is this. If you are paying a mortgage, you do not own your home. It doesn't matter if you've paid on a loan for 1 year or 29, if you default, the home is property of the bank.
"But what about Joe Smith, who works in the same office and makes $150,000 a year. He just bought that $500,000 house. I should have that same standard of living." This is what is partially responsible for the bubble we saw in the last decade. Keeping up with the Jones.
Consider for a moment what it is in your life that is really important. No doubt you will quickly pull to mind your family and closest friends. You may think about a full refrigerator, a safe city, and a clean bill of health. These are things found in small homes, the same as large.
Success is not measured by the size of house you own. So, if you are in the market to become a homeowner, be sure to consider what it could mean to buy truly within your means. Does it mean saving for a few more years and then buying a fixer upper? Does it mean the smaller house in the less prestigious neighborhood is in your budget?
In recent years, "What can I afford?" has turned into "How much monthly payment can I afford?" or "How much credit am I approved for?" These do not equate with affordability. Perhaps it is time to think long and hard about what kind of home is appropriate for you and your family. You may find that travertine and granite can be forgone for a nice kitchen table and family meals.
Now house values are resetting, with some areas still experiencing declines. In high boom areas, such as Florida, Arizona, and California, homes are having to correct from staggering rises of 20, 30 and even 40 percent in home values. This means values rose, and millions of homeowners bought at the top of the market, now finding themselves upside down in their loans.
Despite the crisis, there are still buyers on the market. But many are wary to make a mistake of buying a home they can't pay for. How much home can you really afford? Home affordability, in general, is dependant on a range of factors. These include:
Employment status: Do you have a stable job and income? Lenders will want to know if they can rely on you to make monthly payments for many years to come. With an unemployment rate near 10 percent, it's no wonder a record number of homes are currently in foreclosure. Another way lenders assess your risk is by examining your credit score.
Credit Score: Over your adult life you have been building up a credit score. Every card and loan you have opened has figured into a 3 digit number from 300 - 850. The higher your number, the less "risk" you are perceived to be, and thus, the more likely you'll be extended higher sums of credit for a lower rate. Car loans, student loans, home loans, credit cards, and personal loans. How faithfully you've repaid them, and how many of them you have open, dictates your score.
Number of Dependants: Do you have children or aging parents for whom you are financially responsible? If so, consider medical bills, schools tuition, and daycare when calculating a reasonable budget.
Desired Location: A 2,000 square foot home in rural Nebraska costs dramatically less than the same 2,000 square foot home in the heart of New York City. Prices even range widely by suburb and neighborhood.
Savings: You will need money for a downpayment. Financial Expert Suze Orman recommends you put at least 20 percent down. That means on a $200,000 house, for example, you should have $40,000 in cash to put down. You will also need additional cash for closing costs, as well as repairs and maintenance that are inevitable with homeownership.
Emergency Fund: Do you have a separate savings account worth 8 months of bills? You must have an emergency fund. Just ask the 15 million unemployed. Things do and will happen. If you don't have this fund, you can't afford a house. You may be able to "borrow" money for a house ... but in reality you really can't afford one.
Interest Rates: Interest rates are at historical lows. At this writing, the 30-year fixed rate mortgage is 4.74 percent. To put this in perspective, rates in the 1980's were anywhere from 13 to 18 percent. This means big savings if you are in the position to buy.
Monthly Payments: If you have ever bought a car, one of the first things a salesman will ask you is, "Where do you want your monthly payment to be?" It's all about rates and downpayments with lenders. Yes, it is important that your monthly mortgage payment is no more than 1/3 of your monthly income, but don't be coaxed into buying a home you can't really afford just because the monthly payments are appealing (hello, subprime mortgage crisis).
Now, all that said, this next idea may seem a bit radical for some of you. There is a movement among some Americans to not only reduce their debt, but to get completely out from under it. This translates implicitly into the home buying process.
We have become a nation increasingly driven by the bigger and better. Need we say more than "McMansions." It is a culture of debt, where even the national government owes $14 trillion. And no, not every country has national debt. The United States, though, leads the way.
So, what if you could buy a much smaller house, or a house in a much less prominent neighborhood, and avoid a mortgage payment altogether?
The idea is nearly unheard of in this country. But it could be one that will begin to gain ground as many families struggle to makes ends meet, and even more families learn the hard lesson about home affordability. The truth of the matter is this. If you are paying a mortgage, you do not own your home. It doesn't matter if you've paid on a loan for 1 year or 29, if you default, the home is property of the bank.
"But what about Joe Smith, who works in the same office and makes $150,000 a year. He just bought that $500,000 house. I should have that same standard of living." This is what is partially responsible for the bubble we saw in the last decade. Keeping up with the Jones.
Consider for a moment what it is in your life that is really important. No doubt you will quickly pull to mind your family and closest friends. You may think about a full refrigerator, a safe city, and a clean bill of health. These are things found in small homes, the same as large.
Success is not measured by the size of house you own. So, if you are in the market to become a homeowner, be sure to consider what it could mean to buy truly within your means. Does it mean saving for a few more years and then buying a fixer upper? Does it mean the smaller house in the less prestigious neighborhood is in your budget?
In recent years, "What can I afford?" has turned into "How much monthly payment can I afford?" or "How much credit am I approved for?" These do not equate with affordability. Perhaps it is time to think long and hard about what kind of home is appropriate for you and your family. You may find that travertine and granite can be forgone for a nice kitchen table and family meals.
December Existing-Home Sales Jump
Existing-home sales rose sharply in December, when sales increased for the fifth time in the past six months, according to the National Association of REALTORS®. Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 12.3 percent to a seasonally adjusted annual rate of 5.28 million in December from an upwardly revised 4.70 million in November, but remain 2.9 percent below the 5.44 million pace in December 2009.Lawrence Yun, NAR chief economist, said sales are on an uptrend. “December was a good finish to 2010, when sales fluctuate more than normal. The pattern over the past six months is clearly showing a recovery,” he said. “The December pace is near the volume we’re expecting for 2011, so the market is getting much closer to an adequate, sustainable level. The recovery will likely continue as job growth gains momentum and rising rents encourage more renters into ownership while exceptional affordability conditions remain.”The national median existing-home price for all housing types was $168,800 in December, which is 1.0 percent below December 2009. Distressed homes rose to a 36 percent market share in December from 33 percent in November, and 32 percent in December 2009.“The modest rise in distressed sales, which typically are discounted 10 to 15 percent relative to traditional homes, dampened the median price in December, but the flat price trend continues,” Yun explained.Inventory LevelsTotal housing inventory at the end of December fell 4.2 percent to 3.56 million existing homes available for sale, which represents an 8.1-month supply at the current sales pace, down from a 9.5-month supply in November.NAR President Ron Phipps said buyers are responding to very good affordability conditions despite tight mortgage credit. “Historically low mortgage interest rates, stable home prices, and pent-up demand are drawing home buyers into the market,” Phipps said. “Recent home buyers have been successful with very low default rates, given the outstanding performance for loans originated in 2009 and 2010.”According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.71 percent in December from 4.30 percent in November; the rate was 4.93 percent in December 2009.Transaction TypesA parallel NAR practitioner survey shows first-time buyers purchased 33 percent of homes in December, up from 32 percent in November, but are below a 43 percent share in December 2009.Investors accounted for 20 percent of transactions in December, up from 19 percent in November and 15 percent in December 2009; the balance of sales were to repeat buyers. All-cash sales were at 29 percent in December, compared with 31 percent in November, but up from 22 percent a year ago. “All-cash sales have been consistently high at about 30 percent of the market over the past six months,” Yun said.Single-family home sales jumped 11.8 percent to a seasonally adjusted annual rate of 4.64 million in December from 4.15 million in November, but are 2.5 percent below the 4.76 million level in December 2009. The median existing single-family home price was $169,300 in December, down 0.2 percent from a year ago.Existing condominium and co-op sales surged 16.4 percent to a seasonally adjusted annual rate of 640,000 in December from 550,000 in November, but remain 5.2 percent below the 675,000-unit pace one year ago. The median existing condo price was $165,000 in December, which is 7.4 percent below December 2009.Performance by RegionRegionally, existing-home sales in the Northeast jumped 13.0 percent to an annual pace of 870,000 in December but are 5.4 percent below December 2009. The median price in the Northeast was $237,300, which is 1.4 percent below a year ago.Existing-home sales in the Midwest rose 11.0 percent in December to a level of 1.11 million but are 4.3 percent below a year ago. The median price in the Midwest was $139,700, up 3.3 percent from December 2009. In the South, existing-home sales increased 10.1 percent to an annual pace of 1.97 million in December but are 2.5 percent below December 2009. The median price in the South was $148,400, unchanged from a year ago. Existing-home sales in the West surged 16.7 percent to an annual level of 1.33 million in December but remain 1.5 percent below December 2009. The median price in the West was $204,000, down 5.6 percent from a year ago.
Real Estate Outlook: Double-Dip on the Horizon?
Is the housing market poised for a double dip in house values? Corelogic reports that as of November, home values were down 5 percent from the same time the year before.
CoreLogic Chief Economist Mark Fleming says, "We're continuing to see the influence of seasonal declines that typically depress home prices during the latter part of the year, but the fact that the rate of decline increased for November is indicative of the uphill battle we're facing with the housing recovery."
Steep declines were seen in multiple locales across the nation. Idaho saw home values fall 13.5 percent.
Zillow.com reports that the "decline in home values from the national peak in June 2006 officially surpassed the magnitude of declines experienced during the Great Depression, falling 26 percent from peak levels."
Also troublesome is the monthly pace at which homes values are now declining. In November the rate rose to 0.78 percent.
According to Zillow, "We're still seeing significant weakness in the lowest home value tier, particularly with the expiration of the Federal home buyer tax credits. ... Weakness in the bottom tier of homes naturally translate into the higher tiers as these homeowners become exposed to negative equity (and thus are removed from the demand equation altogether) or have less money to spend buying their next home."
Economists say that for at least the next 2 quarters we'll see larger factors -- such as unemployment -- producing more home value declines.
The New York Times reported last week that we could see new job growth thanks in part to the Federal Reserve's plan to buy up $600 billion worth of Treasury securities.
Janet L. Yellen, Fed vice chairwoman, noted, “It will not be a panacea, but I believe it will be effective in fostering maximum employment and price stability."
There are those, however, that criticize the Fed's move, saying it could instead create future financial imbalances.
Time will tell, but for now, most are hoping for the best.
The Mortgage Banker Association, the national association representing the real estate finance industry, is reporting in their latest findings that mortgage applications rose. The Refinance Index rose 4.9 in just one week. This is welcome news, as the unadjusted Purchase Index increased 41.9 percent compared with the previous week, but was still 10.5 percent lower than the same week one year ago.
Published: January 17, 2011
CoreLogic Chief Economist Mark Fleming says, "We're continuing to see the influence of seasonal declines that typically depress home prices during the latter part of the year, but the fact that the rate of decline increased for November is indicative of the uphill battle we're facing with the housing recovery."
Steep declines were seen in multiple locales across the nation. Idaho saw home values fall 13.5 percent.
Zillow.com reports that the "decline in home values from the national peak in June 2006 officially surpassed the magnitude of declines experienced during the Great Depression, falling 26 percent from peak levels."
Also troublesome is the monthly pace at which homes values are now declining. In November the rate rose to 0.78 percent.
According to Zillow, "We're still seeing significant weakness in the lowest home value tier, particularly with the expiration of the Federal home buyer tax credits. ... Weakness in the bottom tier of homes naturally translate into the higher tiers as these homeowners become exposed to negative equity (and thus are removed from the demand equation altogether) or have less money to spend buying their next home."
Economists say that for at least the next 2 quarters we'll see larger factors -- such as unemployment -- producing more home value declines.
The New York Times reported last week that we could see new job growth thanks in part to the Federal Reserve's plan to buy up $600 billion worth of Treasury securities.
Janet L. Yellen, Fed vice chairwoman, noted, “It will not be a panacea, but I believe it will be effective in fostering maximum employment and price stability."
There are those, however, that criticize the Fed's move, saying it could instead create future financial imbalances.
Time will tell, but for now, most are hoping for the best.
The Mortgage Banker Association, the national association representing the real estate finance industry, is reporting in their latest findings that mortgage applications rose. The Refinance Index rose 4.9 in just one week. This is welcome news, as the unadjusted Purchase Index increased 41.9 percent compared with the previous week, but was still 10.5 percent lower than the same week one year ago.
Published: January 17, 2011
Could Rising Mortgage Rates Spur Housing Rush?
Mortgage rates have been rising ever since November 2010, when lows of 4.42 percent were reported. Bankrate.com recently reported a rise to 5.02 percent in 30-year fixed rate loans, which is the second time in three weeks rates have crossed the 5 percent mark--many experts say signaling the end to the 4 percent mortgage rate era.
Forecasters predict mortgage rates to hover in the 5-6 percent range in 2011.
Yet, some industry experts say the rise in mortgage rates may stimulate a sluggish housing market.
The rising rates create an urgency for potential buyers. They’ll have more incentive to buy soon before mortgage rates go any higher.
After all, higher interest rates mean buyers will pay more for their mortgages. Greg McBride, chief economist at Bankrate.com, told CNNMoney.com that when rates rise 4.25 percent to 5 percent, it takes away 9 percent of the purchasing power of buyers.
Lawrence Yun, chief economist of the National Association of REALTORS®, doesn't foresee a moderate hike in mortgage rates as a negative for the industry. Instead, he says the real mortgage challenge is getting lenders to approve creditworthy buyers for a loan.
"It's less about rates than it is about underwriting standards ... If lenders return to more normal, safe underwriting standards for creditworthy buyers, there would be a bigger boost to the housing market and spillover benefits for the broader economy," Yun said.Source: “Kiss 4% Mortgage Rates Goodbye,” CNNMoney.com (Dec. 30, 2010)
Forecasters predict mortgage rates to hover in the 5-6 percent range in 2011.
Yet, some industry experts say the rise in mortgage rates may stimulate a sluggish housing market.
The rising rates create an urgency for potential buyers. They’ll have more incentive to buy soon before mortgage rates go any higher.
After all, higher interest rates mean buyers will pay more for their mortgages. Greg McBride, chief economist at Bankrate.com, told CNNMoney.com that when rates rise 4.25 percent to 5 percent, it takes away 9 percent of the purchasing power of buyers.
Lawrence Yun, chief economist of the National Association of REALTORS®, doesn't foresee a moderate hike in mortgage rates as a negative for the industry. Instead, he says the real mortgage challenge is getting lenders to approve creditworthy buyers for a loan.
"It's less about rates than it is about underwriting standards ... If lenders return to more normal, safe underwriting standards for creditworthy buyers, there would be a bigger boost to the housing market and spillover benefits for the broader economy," Yun said.Source: “Kiss 4% Mortgage Rates Goodbye,” CNNMoney.com (Dec. 30, 2010)
White House Not Worth What It Used to Be
Over the past three years, the White House has lost nearly a quarter of its value, the Chicago Tribune reports. In just the past month, the 132-room presidential mansion has dropped nearly $4 million.
During the housing boom, the White House was valued at $331.5 million, according to Zillow, but now sits at $253.1 million--a 23.7 percent decline in value.
The White House boasts 16 bedrooms and 35 bathrooms on 18 acres in Washington, D.C.
Many home owners can relate to its steep drop in price due to market conditions. Home owners across the country are facing similar drops, with a 23 percent average decline in housing values since 2006.
Still, Ted Jones, chief economist at the Stewart Title Guaranty Co., says buying a house is a better investment over the long haul than even buying gold. He notes that if you had purchased a median-priced existing home in January 1980 and sold it in October 2010, you’d have a 252 percent gain — despite the 23 percent drop in values since 2006. The value of gold in the last 30 years, on the other hand, has not kept up with inflation.
"And unlike gold, you would have been able to live in the property, reap the tax deductions for mortgage interest and property taxes, and a nontaxable gain of up to $500,000 when the house was sold," Jones says.
Source: “White House Lost Value Too,” Chicago Tribune (Jan. 2, 2011)
During the housing boom, the White House was valued at $331.5 million, according to Zillow, but now sits at $253.1 million--a 23.7 percent decline in value.
The White House boasts 16 bedrooms and 35 bathrooms on 18 acres in Washington, D.C.
Many home owners can relate to its steep drop in price due to market conditions. Home owners across the country are facing similar drops, with a 23 percent average decline in housing values since 2006.
Still, Ted Jones, chief economist at the Stewart Title Guaranty Co., says buying a house is a better investment over the long haul than even buying gold. He notes that if you had purchased a median-priced existing home in January 1980 and sold it in October 2010, you’d have a 252 percent gain — despite the 23 percent drop in values since 2006. The value of gold in the last 30 years, on the other hand, has not kept up with inflation.
"And unlike gold, you would have been able to live in the property, reap the tax deductions for mortgage interest and property taxes, and a nontaxable gain of up to $500,000 when the house was sold," Jones says.
Source: “White House Lost Value Too,” Chicago Tribune (Jan. 2, 2011)
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