Homeowners Can Make Their Home Truly Their Own

“There were numerous interior projects that received a perfect Joy Score of 10: paint entire interior of home, paint one room of home, add a new home office, hardwood flooring refinish, new wood flooring, closet renovation, insulation upgrade, and attic conversion to living area.”

The Responsibilities of Homeownership Give You a Greater Sense of Achievement

“As the homeowner, you have the freedom to adopt a pet, paint the walls any color you choose, renovate your kitchen, and more. . . . Of course, along with the freedoms of homeownership come responsibilities, such as making your monthly mortgage payments on time and maintaining your home. But as the property owner, you'll be caring for your own investment.”

Homeownership Can Lead to Greater Community Engagement

“Living in one place for a longer amount of time creates an obvious sense of community pride, which may lead to more investment in said community.”

Bottom Line

A Need for More Space

A Desire To Be Closer to Loved Ones

“. . . a shifting of priorities has also affected why people are moving. Many companies have moved to permanent remote working policies, giving employees the option to move freely around the country, and people are taking advantage of the perk.”

What Does That Mean for You?

“Your home is your castle and should confer benefits beyond just the numbers.”

Bottom Line

“Homeownership builds financial security. With 65.5% of Americans owning homes, the net worth of a typical homeowner is nearly 40 times the net worth of a non-owner.”

• Your equity (and wealth) grows through home price appreciation.
• Your housing costs are fixed – and that can help combat rising costs from inflation.
• You’ll have greater privacy and the opportunity to customize your living space.

“Living in one place for a longer amount of time creates and [sic] obvious sense of community pride, which may lead to more investment in said community.”

What Does That Mean for You?

“Homeownership remains central to the pursuit of the American Dream. It is a critical driver of economic mobility, delivering financial and social advantages. . . .”

Bottom Line

“New listings–a measure of sellers putting homes up for sale–were up 6% above one year ago. Home sellers in many markets across the country continue to benefit from rising home prices and fast-selling homes. That’s prompted a growing number of homeowners to sell homes this year compared to last, giving home shoppers much needed options.”

Buyer Competition Moderating Helps Inventory Grow Even More

“There has been a pickup in the inventory that we've seen recently, but it's not from a big increase in new listings . . . but rather a slowdown in the pace of sales. And remember that months’ supply measures the inventory of sale relative to the pace of sales. Same inventory, fewer sales, means more months’ supply.”

“As rising inflation and mortgage rates bring U.S. housing demand back from the 2021 frenzy, . . . inventory will grow double-digits over 2021 and offer buyers a better-than-expected chance to find a home.”

How This Impacts You

Bottom Line

Join us today, June 28th at 2:00pm ET to get the insights and answers you need to educate buyers and sellers on the opportunities that still exist in today’s market.

The Emotional Benefits of Homeownership

Your Home Can Reflect Your Tastes and Personality

“One often-cited benefit of homeownership is the knowledge that you own your little corner of the world.”

“The psychology is that this is yours and you’re going to make it as good as possible because you’re in for a long time, . . . “

It Can Enhance Your Neighborhood and Civic Engagement

“Living in one place for a longer amount of time creates and [sic] obvious sense of community pride, which may lead to more investment in said community.”

The Financial Benefits of Homeownership

It Can Help You Feel Financially Stable

“Building equity through your monthly principal payments and appreciation is a critical part of homeownership that can help you create financial stability.”

It Can Grow Your Wealth

Bottom Line

A Little Change Can Bring Lots of Joy

“There were numerous interior projects that received a perfect Joy Score of 10: paint entire interior of home, paint one room of home, add a new home office, hardwood flooring refinish, new wood flooring, closet renovation, insulation upgrade, and attic conversion to living area.”

You’re Free To Update Your Home to Your Heart’s Content

“Your landlord won't always approve changes when you rent. But you have the power to update the home when you're the owner. (Just make sure any big changes are approved by your homeowner's association, if necessary.)”

Bottom Line

“There are many reasons to buy a smaller home—or to downsize from your present home—but sometimes, the idea that "less is more" is what propels homeowners to buy a smaller home.”

You Can Find the Right Home for Your Needs

Your Equity Can Make a Big Impact When You Downsize

“Home prices rose 18% during 2021 in the CoreLogic Home Price Index, the largest annual gain recorded in its 45-year history, generating a big increase in home equity wealth, . . . For low- and moderate-income homeowners, home equity has historically been a major source of wealth.”

Bottom Line

“For first-time home buyers, 29 percent said saving for a downpayment [sic] was the most difficult step in the process.”

First-Time and Repeat Buyers Are Often Eligible

“You don’t have to be a first-time buyer. Over 38% of all programs are for repeat homebuyers who have owned a home in the last 3 years.”

There Are Local Programs and Specialized Programs for Public Servants

“The Teacher Next Door Program was designed to increase home ownership among teachers and other public servants, support community development and increase access to affordable housing free from discrimination.”

Bottom Line

Resources:

1. To get more information on the new FHFA Conforming Loan Limits, click here.
2. To get more information on the new FHA Conforming Loan Limits, click here.

• The ability to save for a down payment
• The ability to qualify for a mortgage at the current lending standards

What Is the Difference Between a Conforming Loan and a Non-Conforming Loan?

“Conforming loans are the only loans that meet the requirements to be acquired by Fannie Mae and Freddie Mac. Jumbo loans, which exceed the conforming limit, are the most common type of nonconforming loan.”

What Difference Does It Make to Me as a Home Buyer?

“Since lenders can’t sell non-conforming loans to Fannie Mae or Freddie Mac to free up their cash, they’re a bit riskier for the lender. This is especially true for jumbo loans, which aren’t backed by any government guarantees. If you default on a jumbo loan, it’s a huge blow to the lender. Thus, lenders generally charge higher interest rates to compensate, and they can have even more requirements. For example, lenders who give out jumbo loans often require that you make a down payment of at least 20% and show that you have at least six months’ worth of cash in reserve, if not more.”

What Happened Last Week?

“Compared to previous years, the 2022 Conforming Loan Limits represent a significant increase due to the historic house price appreciation over the last year. While 95 percent of U.S. countie​s will be subject to the new baseline limit of $647,200, approximately 100 counties will have conforming loan limits approaching $1 million.”

“FHA loans can be very beneficial if you don’t have as much savings, or if your credit score could use some work.”

Bottom Line

Resources:

1. To get more information on the new FHFA Conforming Loan Limits, click here.
2. To get more information on the new FHA Conforming Loan Limits, click here.

1. Rents Are Rising Quickly

2. Renters Miss Out on Equity Gains

3. Homeowners Can Customize to Their Heart’s Content

4. Owning a Home May Provide Greater Mobility than You Think

Bottom Line

"Job ads increasingly offer remote work and surveys indicate that both workers and employers expect work from home to remain much more common than before the pandemic."

“The number of remote workers in the next five years is expected to be nearly double what it was before COVID-19: By 2025, 36.2 million Americans will be remote, an increase of 16.8 million people from pre-pandemic rates.”

How Does This Impact Homeowners?

If you’re one of the nearly 23% of workers who will remain 100% remote: 

If you’re one of the almost 15% of individuals who will have a partially remote or hybrid schedule:

Bottom Line

“Home ownership is one of the indicators Americans say is least connected to financial health."

Homeownership Is an Important Cornerstone of Building Wealth

“. . . between 2016 and 2019, housing wealth was the single biggest contributor to the increase in net worth across all income groups . . . .”

Bottom Line

Affordability

Maintenance

Amenities

“Condominiums, or condos, can be great alternatives to detached homes. City dwellers, singles, couples, seniors, and many others may find condos that suit their needs and budgets. Others may simply prefer low-maintenance living. Buyers who feel ‘priced out’ of homes may discover condos offer an affordable homeownership alternative.”

Bottom Line

Working from Home Isn’t a Passing Fad

Working from Home Gives You More Flexibility and More Options

“. . . after years of apparent but variant trends towards urbanization, the pandemic universally caused a movement away from urban cores, particularly for those with higher incomes who could afford to move and for lower-income individuals seeking lower costs of living.”

Bottom Line

1. Making a Good First Impression

• Do you need to take down your personal art?
• What’s the right amount of landscaping to boost your curb appeal?
• What wall colors are most appealing to buyers?

2. Pricing It Right

3. Maximizing Your Buyer Pool (and Profit)

4. Navigating Negotiations

• The buyer, who wants the best deal possible
• The buyer’s agent, who will use their expertise to advocate for the buyer
• The inspection company, which works for the buyer and will almost always find concerns with the house
• The appraiser, who assesses the property’s value to protect the lender

5. Juggling Legal Documentation

Bottom Line

“17.8 million residential properties in the United States were considered equity-rich, meaning that the combined estimated amount of loans secured by those properties was 50 percent or less of their estimated market value. The count of equity-rich properties in the first quarter of 2021 represented 31.9 percent, or about one in three, of the 55.8 million mortgaged homes in the United States. That was up from 30.2 percent in the fourth quarter of 2020, 28.3 percent in the third quarter and 26.5 percent in the first quarter of 2020.”

1. Refinance to cash out some of the equity or lower their current payment
2. Move to a home that better fits their current needs

1. Refinance

• 452,122 loans with an average mortgage rate of 6.17%
• 1,027,834 loans with an average mortgage rate of 4.39%
• 3,687,780 loans with an average mortgage rate of 4.21%

Example:

2. Move into your dream home

Example:

Bottom Line

“The idea of a place of one’s own drives the American story. We became a nation out of a desire to slip the bonds of Europe, which was still in many respects a collection of feudal societies. Old rich families, or the church, owned all the land and, with few exceptions, everyone else was a tenant. The magic of America lay not only in its sense of opportunity, but also in the belief that life could in every way be shaped by the individual. People traveled here not just for religious freedom, but because in America anything seemed possible.”

“Homeownership is undeniably the cornerstone of the American Dream, and is inseparable from our national ethos that, through hard work, every American should have opportunities for prosperity and success. It is the stability and wealth creation that homeownership provides that represents the primary mechanism through which many American families are able to achieve upward socioeconomic mobility and greater opportunities for their children.”

Has the past year changed the American view on homeownership?

• 59% - "I want to be a homeowner"
• 33% - "I want to live in a space that I can invest in improving"
• 31% - “I need more space"
• 22% - "I want to build equity"

Millennials believe most strongly in homeownership.

"Americans, even millennials who many thought would never buy, have a strong preference for homeownership for the same reasons many generations before them have -- to invest in a place of their own and in their communities, and to build a solid financial foundation for themselves and their families."

“Millennials have delayed marriage and having children in favor of investing in education, pushing marriage and family formation to their early-to-mid thirties, compared with previous generations, who primarily made these lifestyle choices in their twenties…Delayed lifestyle choices delay the desire for homeownership.”

“As more millennials get married and form families, millennials remain poised to transform the housing market. In fact, the housing market is already experiencing the earliest gusts of the tailwind.”

Bottom Line

“Homeownership has cemented its role as part of the American Dream, providing families with a place that is their own and an avenue for building wealth over time. This ‘wealth’ is built, in large part, through the creation of equity…Building equity through your monthly principal payments and appreciation is a critical part of homeownership that can help you create financial stability.”

"The wealth-building power of homeownership shows that home is not only where your heart is, but also where your wealth is…For the majority of households that transition into homeownership, the most recent data reinforces that housing is one of the biggest positive drivers of wealth creation.”

1. Roughly 38% of all homes are mortgage-free
2. The average equity gain of mortgaged homes in the last year was $26,300
3. The current average equity of mortgaged homes is greater than $200,000
4. There was a 16.9% increase in total homeowner equity
5. Total homeowner equity reached over $1.5 trillion

“This equity growth has enabled many families to finance home remodeling, such as adding an office or study, further contributing to last year’s record level in home improvement spending."

“This growing bank of personal wealth that homeownership affords was noticed by many but in particular for first-time buyers who want a piece of the cake.”

Increasing wealth benefits more than just homeowners.

“In economic literature, the wealth effect is a term used to describe the fact that individuals have a tendency to increase their spending habits when their actual or perceived wealth increases. For homeowners, the latent savings achieved by building equity in their home and the growth in home values over time both contribute to increased net worth. Through the wealth effect, this in turn translates to households having a greater ability and willingness to spend money across a wide range of other types of goods and services that spur business activity and provide a positive multiplier effect that creates jobs and income throughout the economy.”

Bottom Line

How can equity help a household?

1. You’re experiencing financial hardship (job loss, medical expenses, etc.)

2. You need money to start a new business

3. You want to invest in a loved one’s future

“52% of Americans who bought their first home in 2020 said they got help with their down payment from friends or family. The number one lender? Their parents.”

Bottom Line

1. This time, housing supply is extremely limited

2. This time, housing demand is real

3. This time, households have plenty of equity

“17.8 million residential properties in the United States were considered equity-rich, meaning that the combined estimated amount of loans secured by those properties was 50 percent or less of their estimated market value…The count of equity-rich properties in the fourth quarter of 2020 represented 30.2 percent, or about one in three, of the 59 million mortgaged homes in the United States.”

Bottom Line

Non-Financial Benefits

• Pride of Ownership: It feels good to have a place that’s truly your own, especially since you can customize it to your liking. “The personal satisfaction and sense of accomplishment achieved through homeownership can enhance psychological health, happiness and well-being for homeowners and those around them.”
• Civic Participation: Homeownership creates stability, a sense of community, and increases civic engagement. It’s a way to add to the strength of your local area and drive value into your neighborhood.

Financial Benefits

• Net Worth: Homeownership builds your net worth. Today, the median household net worth of all homeowners is $254,900, while the median net worth of renters is only $6,270.
• Financial Security: Equity, appreciation, and more predictable monthly housing expenses are huge financial benefits of owning a home. Homeownership is truly the best way to improve your long-term financial position.

Economic Benefits

• Housing-Related Spending: An economic force throughout our nation, housing-related expenses accounted for more than one-sixth of the country’s economic activity over the past three decades.
• Entrepreneurship: Homeownership is also a form of forced savings that can provide entrepreneurial opportunities. “Owning a home enables new entrepreneurs to obtain access to credit to start or expand a business and generate new jobs by using their home as collateral for small business loans.”

Bottom Line

1. How Can I Better Understand the Process, and How Much Can I Afford?

“Financial planners recommend limiting the amount you spend on housing to 25 percent of your monthly budget.”

2. How Much Do I Need for a Down Payment?

“Over time, these automatic deposits add up. For example, $50 a month accumulates to $600 a year and $3,000 after five years, plus interest that has compounded.”

3. Saving Takes Time: Practice Living on a Budget

"If there is any silver lining to the current economic landscape, it's that mortgage rates are hanging around record lows…Additionally, shelter-in-place orders helped many who were fortunate enough to keep their jobs save for a down payment -- one of the largest hurdles of buying a home. The combination of low rates and the opportunity to save is enabling many millennials to move up their home buying timeline."

Bottom Line

1. Mortgage Rates Are Historically Low

“Given this means homes could cost potentially tens of thousands less over the lifetime of the loan.”

2. Equity Is Growing

3. Home Prices Are Appreciating

4. There Are Not Enough Homes for Sale

Bottom Line

• FHFA: 7.8%
• CoreLogic: 7.3%
• Case-Shiller: 7%

Inflation and the Comeback from the Housing Crash

“It has been over fourteen years since the bubble peak. In the Case-Shiller release today, the seasonally adjusted National Index, was reported as being 22.2% above the previous bubble peak. However, in real terms (adjusted for inflation), the National index is still about 2% below the bubble peak…As an example, if a house price was $200,000 in January 2000, the price would be close to $291,000 today adjusted for inflation.”

The COVID Impact on Home Prices

“While homeowners continue to want their outdoor spaces that offer a safe retreat, that appeal has shifted into other parts of the home, coupling comfort with function. In other words, homeowners want amenities for work and leisure, and they plan to enjoy them long after the pandemic.”

“Nationally, the inventory of homes for sale decreased 39.2% over the past year in November…This amounted to 490,000 fewer homes for sale compared to November of last year.”

• National Association of Realtors: 4.5%
• Freddie Mac: 2.6%
• Fannie Mae: 2.1%
• Mortgage Bankers Association: 2%

This Is Nothing Like 2006

“Such a frenzy of activity, reminiscent of 2006, raises questions about a bubble and the potential for a painful crash. The answer: There’s no comparison. Back in 2006, dubious adjustable-rate mortgages taxed many buyers’ budgets. Some loans didn’t even require income documentation. Today, buyers are taking out 30-year fixed-rate mortgages. Fourteen years ago, there were 3.8 million homes listed for sale, and home builders were putting up about 2 million new units. Now, inventory is only about 1.5 million homes, and home builders are underproducing relative to historical averages.”

Bottom Line

1. Rent Will Continue to Increase

2. Freedom to Customize

3. Privacy

4. Flexibility for Relocation

5. Building Equity

6. Tax Advantages

Bottom Line