The American Dream of homeownership is alive and well. Recent reports show that the US homeownership rate has rebounded from recent lows and is headed in the right direction. The personal reasons to own differ for each buyer, but there are many basic similarities.

Today we want to talk about the top 5 financial reasons you should own your own home.

1. Homeownership is a form of forced savings – Paying your mortgage each month allows you to build equity in your home that you can tap into later in life for renovations, to pay off high-interest credit card debt, or even send a child to college. As a renter, you guarantee that your landlord is the person with that equity.
2. Homeownership provides tax savings – One way to save on taxes is to own your own home. You may be able to deduct your mortgage interest, property taxes, and profits from selling your home, but make sure to always check with your accountant first to find out which tax advantages apply to you in your area.
3. Homeownership allows you to lock in your monthly housing cost – When you purchase your home with a fixed-rate mortgage, you lock in your monthly housing cost for the next 5, 15, or 30 years. Interest rates have remained around 4% all year, marking some of the lowest rates in history. The value of your home will continue to rise with inflation, but your monthly costs will not.
4. Buying a home is cheaper than renting – According to the latest report from Trulia, it is now 37.4% less expensive to buy a home of your own than to rent in the US. That number varies throughout the country but ranges from 6% cheaper in San Jose, CA to 57% cheaper in Detroit, MI.
5. No other investment lets you live inside of it – You can choose to invest your money in gold or the stock market, but you will still need somewhere to live. In a home that you own, you can wake up every morning knowing that your investment is gaining value while providing you a safe place to live.

Bottom Line

Before you sign another lease, let’s get together to help you better understand all your options.

Multigenerational homes are coming back in a big way! In the 1950s, about 21%, or 32.2 million Americans shared a roof with their grown children or parents. According to an article by Realtor.com, “Nearly 1 in 5 Americans is now living in a multigenerational household – a household with two or more adult generations, or grandparents living with grandchildren – a level that hasn’t been seen in the U.S. since 1950.”

Another report that proves this point is the National Association of Realtors’ (NAR) 2017 Profile of Home Buyers and Sellers which states that 13% of home buyers purchased multigenerational homes last year. The top 3 reasons for purchasing this type of home were:

1. To take care of aging parents (22%, up from 19% last year)
2. Cost savings (17%)
3. Children over the age of 18 moving back home (16%, up from 14% last year)

Valerie Sheets, Spokesperson for Lennar, points out that,

“Everyone is looking for the perfect home for any number of family situations, such as families who opt to take care of aging parents or grandparents at home, or millennials looking to live with their parents while they attend school or save for a down payment.”

For a long time, nuclear families (a couple and their dependent children) became the accepted norm, but John Graham, co-author of “Together Again: A Creative Guide to Successful Multigenerational Living,” says, “We’re getting back to the way human beings have always lived in – extended families.”

This shift can be attributed to several social changes over the decades. Growing racial and ethnic diversity in the U.S. population helps explain some of the rise in multigenerational living; “Data suggest that multigenerational living is more prevalent among Asian (28%), Hispanic (25%), and African-American (25%) families, while U.S. whites have fewer multigenerational homes (15%).”

Additionally, women are a bit more likely to live in multigenerational conditions than are their male counterparts (12% vs. 10%, respectively). Last but not least, basic economics.

Valerie Sheets brings to light the fact that home prices have been skyrocketing in recent years. She says that, “As home prices increase, more families tend to opt for living together.”

Bottom Line 

Multigenerational households are making a comeback. While it is a shift from the more common nuclear home, these households might be the answer that many families are looking for as home prices continue to rise in response to a lack of housing inventory.

The National Association of Realtors (NAR) released their latest Quarterly Metro Home Price Report last week. The report revealed that severely lacking inventory across the country drained sales growth and kept home prices rising at a steady clip in nearly all metro areas. Home prices rose 5.3% over the last quarter across all metros.

Lawrence Yun, Chief Economist at NAR, discussed the impact of low inventory on buyers in the report:

“Unfortunately, the pace of new listings were unable to replace what was quickly sold. Home shoppers had little to choose from, and many had to outbid others in order to close on a home. The end result was a slowdown in sales from earlier in the year, steadfast price growth and weakening affordability conditions.”

What this means to sellers

Rising prices are a homeowner’s best friend. As reported by the Washington Post in a recent article post:

“The rise in median sales prices has made current homeowners much more willing to sell their home, and that willingness is one of the main drivers behind the inventory that does make it on to the market. While it hasn’t been enough to meet demand, it has made the situation much better, compared with even three or four years ago.”

What this means to buyers

In a market where prices are rising, buyers should take into account the cost of waiting. Obviously, they will pay more for the same house later this year or next year. However, as Construction Dive reported, the amount of cash needed to purchase that home will also increase.

“These factors have created a situation where the market keeps moving the goalposts in terms of the down payment necessary for first-time homebuyers to get into a home.”

Bottom Line 

If you’re thinking of selling and moving down, waiting might make sense. If you are a first-time buyer or a seller thinking of moving up, waiting probably doesn’t make sense.

Every Hour in the US Housing Market: 

• 624 Homes Sell
• 347 Homes Regain Positive Equity
• Median Home Values Go Up $1.13

Each year, most homeowners wait until the spring to sell their houses because they believe that they can get a better deal during the normal spring buyer’s market. However, recently released data suggests that a seller’s best deal may be available right now. The concept of ‘supply & demand’ reveals that the best price for an item will be realized when the supply of that item is low and the demand for that item is high. Let’s see how this applies to the current residential real estate market.

SUPPLY

It is no secret that the supply of homes for sale has been far below the number needed for over a year. A normal market requires six months of housing inventory to meet the demand. The latest report from the National Association of Realtors (NAR) revealed that there is currently only a 4.2-month supply.

Supply is currently very low!!

DEMAND

A report that was just released tells us that demand is very strong. The most recent Foot Traffic Report (which sheds light on the number of buyers out looking at homes) disclosed that there are more buyers right now than at any other time in the last twelve months. This includes more buyers looking at homes right now than at any time during last year’s spring market.

Demand is currently very high!! 

Bottom Line

Waiting until the spring to list your house for sale made sense in the past. This year is different. The best deal is probably available right now.