Homeownership’s Impact on Net Worth

Over the last six years, homeownership has lost some of its allure as a financial investment. As homeowners suffered through the housing bust, more and more began to question whether owning a home was truly a good way to build wealth. A study by the Federal Reserve formally answered this question.

Some of the findings revealed in their report:

• The average American family has a net worth of $77,300
• Of that net worth, 61.4% ($47,500) of it is in home equity
• A homeowner’s net worth is over thirty times greater than that of a renter
• The average homeowner has a net worth of $174,500 while the average net worth of a renter is $5,100

Bottom Line

The Fed study found that homeownership is still a great way for a family to build wealth in America. :-)

Vacation Home Property Sales Surge

The American desire to own a second home as a vacation home is alive and well!

The National Association of Realtors analysis of U.S. Census Bureau data shows there are approximately 8 million vacation homes in the U.S. Their 2014 Investment and Vacation Home Buyers Survey shows vacation home sales improved substantially in 2013.
NAR Chief Economist Lawrence Yun said favorable conditions are driving second-home sales:
“Growth in the equity markets has greatly benefited high net-worth households, thereby providing the wherewithal and confidence to purchase recreational property,” he said. “However, vacation-home sales are still about one-third below the peak activity seen in 2006.”
Here are the key findings from the report:

Raw Numbers

• Vacation-Home sales rose 29.7 percent to 717,000 from 553,000 in 2012
• Sales accounted for 13% of all transactions last year, up from 11% in 2012
• The median price was $168,700, compared with $150,000 in 2012, reflecting a greater number of more expensive recreational property sales in 2013
• 42% of vacation homes purchased in 2013 were distressed homes (in foreclosure or short sale)

Buyer Profile

• The typical vacation-home buyer was 43 years old
• The median household income was $85,600
• Buyers plan to own their recreational property for a median of 6 years
• 33% said they were likely to purchase another vacation home within two years
• 82% of all second-home buyers said it was a good time to buy (compared with 67% of primary residence buyers)

Reasons for Purchasing

Lifestyle factors remain the primary motivation for vacation-home buyers:

• 87% want to use the property for vacations or as a family retreat
• 31% plan to use it as a primary residence in the future
• 28% wanted to diversify their investments or saw a good investment opportunity
• 23% plan to rent to others

Location

• 41% of vacation homes purchased last year were in the South
• 28% in the West
• 18% in the Northeast
• 14% in the Midwest

The vacation homebuyer purchased a property that was a median distance of 180 miles from their primary residence (down from 435 in 2012)

• 46% were within 100 miles
• 34% were more than 500 miles

Financing

• 38% of vacation-home buyers paid cash in 2013
• The median down payment was 30%, up from 27% in 2012

If you are thinking about buying a vacation rental, don't think for too much longer. Make it happen now! :-)

5 REASONS TO BUY A HOME NOW

 Based on prices, mortgage rates and soaring rents, there may have never been a better time in real estate history to purchase a home than right now. Here are five major reasons purchasers should consider buying. 

 

1. Competition is about to Increase
Every spring a surge of prospective purchasers enter the housing market. Like you, they will want the best home available in the best location at the best price. They will be competing with you for the ‘steals’ in the market. Don’t miss the opportunity to get that ‘once-in-a-lifetime’ buy available today that no longer be available as the market heats up..

2. Price Increases Are on the Horizon
Nationally, home prices are projected to appreciate by 4.5% in 2014 and by over 19% from now until 2018. First home buyers will probably pay more both in price and interest rate if they wait until the spring. Even if you are a move-up buyer, it will wind-up costing you more in net dollars as the home you will buy will appreciate at approximately the same rate as the house you are in now.

3. Owning a Home Helps Create Family Wealth
Whether you rent or you own the home you are living in, you are paying a mortgage. Either you are paying your mortgage or your landlord’s. The Federal Reserve, in a recent study, revealed that the net worth of the average homeowner is 30 times greater than that of a renter.

4. Interest Rates Are Projected to Rise
The Mortgage Bankers Association, the National Association of Realtors, Freddie Mac and Fannie Mae have all projected that the 30-year mortgage interest rate will be over 5% by the spring of 2015. That is an increase of almost 3/4 of a point over current rates.

5. Buy Low, Sell High
Most would all agree that, when investing, we want to buy at the lowest price possible and hope to sell at the highest price. Housing can create family wealth as long as we follow this simple principle. Today, real estate is selling ‘low’ compared to where it will be next year. It’s time to buy.