Recently, we shared the results of the latest Home Price Expectation Survey by Pulsenomics. One of the big takeaways from the survey is that over the next five years, home prices will appreciate 3.5% per year on average, and cumulatively will grow by around 18%.
So what does this mean for homeowners and their equity position?
For example, let’s assume homeowners purchased and closed on a $150,000 home in January of this year. If we only look at the projected increase in the price of that home, how much equity would they earn over the next 5 years?
Over a five-year period, their equity will increase by over $28,000! This figure does not even take into account their monthly principal mortgage payments. In many cases, home equity is one of the largest portions of a family’s overall net worth.
Bottom Line
Not only is homeownership something to be proud of, it also offers you and your family the ability to build equity you can borrow against in the future. If you are ready and willing to buy, let’s meet up to find out if you are able to today!
Are you up to date on the latest news about the New York State School Tax Relief (STAR) program? The Basic and Enhanced STAR benefits save most New York homeowners hundreds of dollars annually!
This year, the state announced that certain homeowners will now have to register for the new STAR credit. New applicants who qualify for STAR will receive a credit in the form of a check rather than a property tax exemption.
You should register for STAR if you:
• Bought your home after the 2015 STAR application deadline (www.tax.ny.gov/pit/property/star/2015-star-deadlines.htm)
• Never applied for the STAR benefit on your primary residence, or
• Received a letter advising you to register for Basic STAR.
Please note that you do not need to register for STAR if you are already receiving a STAR exemption and purchased your current home prior to May 1, 2014.
The deadline to register in order to receive your rebate check by September was July 1, but if you haven’t registered yet, you still can! You’ll simply receive your rebate check at a later date.
To register, please visit www.tax.ny.gov/star or call (518) 457-2036 from 8:30 a.m. to 4:30 p.m. weekdays.
We have reported many times that the American Dream of homeownership is alive and well. The personal reasons to own a home differ for each buyer, but there are many basic similarities.
Eric Belsky is the Managing Director of the Joint Center of Housing Studies (JCHS) at Harvard University. He authored a paper on homeownership titled The Dream Lives On: The Future of Homeownership in America. In his paper, Belsky reveals five financial reasons why people should consider buying a home.
Here are the five reasons, each followed by an excerpt from the study:
1) Housing is typically the one leveraged investment available.
“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”
2) You’re paying for housing whether you own or rent.
“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”
3) Owning is usually a form of “forced savings.”
“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”
4) There are substantial tax benefits to owning.
“Homeowners are able to deduct mortgage interest and property taxes from income. On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”
5) Owning is a hedge against inflation.
“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.
Bottom Line
We realize that homeownership makes sense for many Americans for an assortment of social and family reasons. It also makes sense financially. If you are considering a purchase this year, let’s get together and evaluate your ability to do so.
In a recent blog post on Marginal Revolution, economist Alex Tabarrok discussed homeownership as an investment.
Here is what Mr. Tabarrok had to say:
“Housing is overrated as a financial investment. First, it’s not good to have a significant share of your wealth locked into a single asset. Diversification is better and it’s easier to diversify with stocks. Second, unless you are renting the basement, houses don’t pay dividends. Stocks do. You can hope that your house will accumulate in value but don’t count on it. Indeed, you should expect that as an investment your house will appreciate less than does the stock market. You didn’t expect to get a great investment and a place to live in the meantime, did you?”
Here is a rebuttal:
We have reported many times that the American Dream of homeownership is alive and well.
Let’s use some quotes from Belsky’s study to address comments by Mr. Tabarrok:
Tabarrok:
“Housing is overrated as a financial investment.”
Belsky:
“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”
Tabarrok:
“You can hope that your house will accumulate in value but don’t count on it. Indeed, you should expect that as an investment your house will appreciate less than does the stock market.”
Belsky:
“Homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”
Tabarrok:
“You didn’t expect to get a great investment and a place to live in the meantime, did you?”
Belsky:
“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.
Homeowners are able to deduct mortgage interest and property taxes from income…On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”
Bottom Line
We realize that homeownership makes sense for many Americans for an assortment of social and family reasons. It also makes sense financially. If you are considering a purchase this year, contact a local professional who can help evaluate your ability to do so. For more information, please contact The Olear Team today!
We have reported many times that the American Dream of homeownership is alive and well. The personal reasons to own a home differ for each buyer, but there are many basic similarities.
