Thursday, July 26, 2012

Why Buying Is A Good Idea

"The large numbers attached to a real estate purchase can often overwhelm first-time home buyers, so they continue to rent as a result," says Dan Auito, a Kodiak, Alaska-based real estate consultant and the author of "Magic Bullets in Real Estate." But, he adds, "the advantages far outweigh the risk or effort required in obtaining and maintaining one's own personal residence."
Those perks are both financial and feel-good. According to the National Association of Realtors, record numbers of Americans have purchased a home in recent years. U.S. Census data show a total of 68.3 percent of Americans are homeowners.
Here are six significant reasons to grab that hefty piece of the ownership data pie:
  • Tax deductions: Although they're the stuff that bill-paying grumbles are made of, mortgage interest and property tax obligations are a homeowner's best friend come April 15. For both federal and state income taxes, these payments are usually fully deductible. And in the first years after a home purchase, most of the money paid toward those mortgage payments represents interest. Think of it as a government subsidy on the purchase. In addition, many closing costs, such as points paid and fees for your loan application and appraisal, may be deductible, either immediately or down the line when you plant that "For Sale" sign in your lawn.
  • Appreciation: We're talking about the financial kind. Homes are considered a safe, steady investment, with values that rise while debt amount drops. The national median home price has risen every year --even during recessions and periods of sales declines -- since 1968, when the NAR began tracking it. Typically, the values appreciate at the rate of inflation, plus 1 or 2 percentage points. Sometimes it's a greater increase. In 2004, for instance, the median price went up by 9.4 percent. A long-term investment? Yes. Harvard University's Joint Center for Housing Studies found a dramatic increase in the rate of return on housing the longer it's held. For example, a buyer who makes a 10 percent cash down payment with an annual home appreciation rate of 5 percent could expect a 94 percent return on the cash after three years of homeownership . After five years, the return increases to 225 percent, and after 10 years, a whopping 623 percent. 
Equity: The portion of property that's actually owned, or equity, also rises over time. "Owning a home allows you to build the equity that accompanies appreciation," explains Timothy Spangler, CEO of a real estate investment company and author of "From the Rat Race to Real Estate." He adds, "You can't build equity if you are a renter." Moira Cotlier of New Haven, Conn., is a good example. "We paid rent to landlords for nine years before buying our house. Nine years," she says. "Do you know how many tens of thousands of dollars that was for places we had no stake in? What a waste!" Since 2001, she and her husband, Keith, have been paying themselves instead. Mary and Rich Hallahan, who own a Madison, N.J., home, think of the investment this way: "You are forcing yourself to save by investing in an asset over time," she says. Their home, purchased in 2002, has appreciated by about 10 percent since then. What's more, a first home often leads to a better second home. Equity buildup and appreciation in a first home help in the transition to a second. According to the NAR, first-time home buyers' median down payment is 3 percent; repeat buyers, meanwhile, put down 22 percent.

  • Borrowing power: For owners who opt to stay put, equity still comes in handy. It can be used to secure a loan or obtain a line of credit, meaning "more buying power to fund home improvements or to assist with the purchasing of investment property," Spangler says. Cash for emergencies or big-ticket items is also an option.
  • Stability: Renters generally have no idea what they'll be paying a few years down the line. Home owners with fixed-rate mortgages, however, essentially have the same payment for up to 30 years. Even those with adjustable rates have a cap and can figure out their maximum potential mortgage payment. The stability also comes from the sense homeowners get of being anchored to their community. "It gives you a little more leverage when it comes to community issues and activism," Cotlier says. "When you own your home, and you're paying taxes on it, you might have your voice a little better heard when it comes time to speak up about neighborhood or community issues."
  • Freedom: Speaking up within your home is also much easier when you own it. No need to worry about "the downstairs neighbors complaining you're too loud, or the upstairs neighbor stomping around at 1 a.m.," says Sandy O'Keefe, who rented for about eight years before purchasing a Mansfield, Mass., home with her husband, Rob, in 2004. O'Keefe also appreciates the decision-making autonomy. "You ... pick every paint color [and] won't get fined for scratches on the wall," she says. The decision-making extends to the yard as well. Cotlier sums up the homeownership benefits in one word: roots. "You can plant perennials and enjoy them forever. You can plant a tree and watch it grow and grow. You can plant a family and watch it blossom.

    If a home at the lake is in your future, contact the Spouses Selling Houses team. Until next time!! Ebbie :)

    Tuesday, July 24, 2012

    Mortgage rates lower than last record

    Mortgage rates fell again, smashing previous record lows, according to a regular weekly release from mortgage giant Freddie Mac.
    The rate for a 30-year, fixed-rate loan, the most popular mortgage product, dropped to 3.62% from 3.66% last week. The rate has matched or hit a new low for 10 of the past 11 weeks, Freddie Mac said. Meanwhile, the 15-year fixed rate fell to 2.89%, down from 2.94%.
    "Recent economic data releases of less consumer spending and a contraction in the manufacturing industry drove long-term Treasury bond yields lower over the week, and allowed fixed mortgage rates to hit new all-time record lows," said Frank Nothaft, Freddie Mac's chief economist.
    The 15-year fixed-rate mortgage is popular among homeowners who are seeking to refinance or to trade-up and minimize their total interest payments. At the current rate, a borrower financing $200,000 would pay $1,370 a month and spend a total of just under $47,000 in interest over the 15-year span of the mortgage.
    Related: Where home prices are rising fastest
    Buyers who want to minimize their monthly payments by opting for a 30-year loan would have payments of just $911 a month on a $200,000 loan. But they would pay $128,000 in interest over the life of the loan.
    One year ago, the same 30-year loan would have carried a 4.6% rate and cost about $100 more a month.

    Rates will probably stay low for a while, according to Keith Gumbinger of, a mortgage information provider.
    He pointed out that the spread between Treasury yields and interest rates is still wider than usual, with a full two percentage points separating them. More typical is a spread of about 1.7 percentage points.
    That means mortgage rates could have even further to fall if Treasury yields drop or even hold steady.
    If you are in the market for a new home at the lake, please contact the Spouses Selling Houses team. Until next time! Ebbie :)