Recently, David Greene, co-host of the BiggerPockets podcast and a nationally renowned author and speaker, wrote an article in Forbes explaining how investing in real estate could help build wealth. Many of the points he made also apply to a family owning their own home. Here are a few:

1. Appreciation

“The rising of home prices over time, is how the majority of wealth is built in real estate. This is the ‘home run’ you hear of when people make a large windfall of money. While prices fluctuate, over the long run real estate values have always gone up, always, and there is no reason to think that is going to change.

One thing to consider when it comes to real estate appreciation affecting your ROI is the fact that appreciation combined with leverage offers huge returns. If you buy a property for $200,000 and it appreciates to $220,000, your property had made you a 10% return. However, you likely didn’t pay cash for the property and instead used the bank’s money. If you consider that you may have put 10% down ($20,000), you actually have doubled your investment, a 100% return.”

2. Leverage

“By nature, real estate is one of the easiest assets to leverage I have ever come across—maybe the easiest. Not only is it easy to leverage the financing of it, but the terms are incredible compared to any other kind of loan. Interest rates are currently below 5%, down payments can be 20% or less, and loans are routinely amortized over 30-year periods.”

3. Paying Off the Debt

“One of the best parts of investing in real estate is the fact that … you’re slowly paying down your loan balance with each payment to the bank… After enough time passes, a good chunk of every payment comes off the loan balance, and wealth is created.”

4. Forced Equity

“Forced equity is a term used to refer to the wealth that is created when an investor does work to a property to make it worth more… Example of this would be adding a third or fourth bedroom to a property with only two, adding a second bathroom to a property with only one, or adding more square footage to a property with less than the surrounding houses.”

Though Green was talking about investors, the same could be said about a family upgrading their own home.

Bottom Line

Green put it best by saying: “There are many ways to build wealth in America, but real estate might be the safest, steadiest and simplest way to do so.”

Thinking about buying a home or selling your house this year? If so, you’re going to want to pay attention to where home prices are headed in 2019. The experts agree that they will continue to grow as the year goes by. Let’s get together to chat about what rising prices mean for you!

The top reason homeowners cited for not listing their home for sale in 2018, was their belief that they would be unable to find a home to buy. After 3 years of declining inventory for sale, we’re finally starting to see more listings come to market! Let’s get together to chat about what this means for our market!

Homeowners who purchase their homes before the age of 35 are better prepared for retirement at age 60, according to a new Urban Institute study. The organization surveyed adults who turned 60 or 61 between 2003 and 2015 for their data set.

"Today’s older adults became homeowners at a younger age than today’s young adults. Half the older adults in our sample bought their first house when they were between 25 and 34 years old, and 27 percent bought their first home before age 25."

The full breakdown is in the chart below:

The study goes on to show the impact of purchasing a home at an early age. Those who purchased their first homes when they were younger than 25 had an average of $10,000 left on their mortgage at age 60. The 50% of buyers who purchased in their mid-twenties and early-30s had close to $50,000 left, but traditionally had purchased more expensive homes.

Many housing experts are concerned that the homeownership rate amongst millennials, those 18-34, is much lower than previous generations in the same age range. The study results gave a great reason why this generation should consider buying instead of signing a renewal on their lease:

“As people age into retirement, they rely more heavily on their wealth rather than their income to support their lifestyles. Today’s young adults are failing to build housing wealth, the largest single source of wealth, at the same rate as previous generations.

While people make the choice to own or rent that suits them at a given point, maybe more young adults should take into account the long-term consequences of renting when homeownership is an option.”

Bottom Line

If you are one of the many young people debating whether buying a home this year is right for you, let’s get together to discuss your options!

During 2018, home values increased nationally by over 5%! If you are planning on selling your home in 2019 you may be pleasantly surprised by how much your home has appreciated! Every market is different. Let's get together if you are curious just how much your home has gone up in value!

You may have heard that the housing market is softening. There is no doubt that buyer traffic has decreased. There are fewer purchasers in the market than there were last month and at this time last year. What you may not have heard, however, is that there is still a severe shortage of listing inventory in many regions of the country.

In a recent interview discussing the housing market, First American’s Chief Economist Mark Fleming put it simply:

“The biggest challenge is really the availability of supply.”

When we look at available inventory numbers released by the National Association of Realtors (NAR), we see that the actual number of homes for sale has decreased in each of the last five months.

What does this mean to you as a seller?

The best time to sell is when there is less competition. That guarantees you a better price and fewer hassles in the transaction.

Bottom Line

If you are thinking of selling your house this year, the best time to put it on the market might be right now. Let’s get together to evaluate the demand for your house in our market!

If you plan on buying a home this year, it doesn't make sense to wait! Mortgage interest rates and home prices are both projected to increase significantly throughout 2019. Let's get together to discuss your home buying plans today!

As we kick off the new year, many families have made resolutions to enter the housing market in 2019. Whether you are thinking of finally ditching your landlord and buying your first home or selling your starter house to move into your forever home, there are two pieces of the real estate puzzle you need to watch carefully: interest rates & inventory.

Interest Rates

Mortgage interest rates had been on the rise for much of 2018, but they made a welcome reversal at the end of the year. According to Freddie Mac's latest Primary Mortgage Market Survey, rates climbed to 4.94% in November before falling to 4.62% for a 30-year fixed rate mortgage last week. Despite the recent drop, interest rates are projected to reach 5% in 2019.

The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but also impacts your purchasing power.

Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford to buy will decrease if you plan to stay within a certain monthly housing budget.

The chart below shows the impact that rising interest rates would have if you planned to purchase a $400,000 home while keeping your principal and interest payments between $2,020-$2,050 a month.

With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000).

Inventory
A ‘normal’ real estate market requires there to be a 6-month supply of homes for sale in order for prices to increase only with inflation. According to the National Association of Realtors (NAR), listing inventory is currently at a 3.9-month supply (still well below the 6-months needed), which has put upward pressure on home prices. Home prices have increased year-over-year for the last 81 straight months.

The inventory of homes for sale in the real estate market had been on a steady decline and experienced year-over-year drops for 36 straight months (from July 2015 to May 2018), but we are starting to see a shift in inventory over the last six months.

The chart below shows the change in housing supply over the last 12 months compared to the previous 12 months. As you can see, since June, inventory levels have started to increase as compared to the same time last year.

This is a trend to watch as we move further into the new year. If we continue to see an increase in homes for sale, we could start moving further away from a seller’s market and closer to a normal market.

Bottom Line
If you are planning to enter the housing market, either as a buyer or a seller, let's get together to discuss the changes in mortgage interest rates and inventory and what they could mean for you.

Whether you're buying or selling a home, the transaction can be a bit overwhelming. Working with a real estate professional who understands your market can make your life that much easier! Let's get together to discuss your plans to buy or sell in 2019!