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A Homeowner’s Net Worth Is 40x Greater Than a Renter’s

A Homeowner’s Net Worth Is 40x Greater Than a Renter’s | MyKCM
 

One of the best ways to build your family’s financial future is through homeownership. Recent data from the Federal Reserve indicates the net worth of a homeowner is actually over 40 times greater than that of a renter. Maybe it’s time to start thinking about buying a home, especially when they’re so affordable in today’s market.

Every three years the Survey of Consumer Finances shows the breakdown of how owning a home helps build financial security. In the graph below, we see that the average net worth of homeowners continues to grow, while the net worth of renters tends to hold fairly steady and be significantly lower than that of homeowners. The gap between owning and renting just keeps getting wider over time, making homeownership more and more desirable for those who are ready.A Homeowner’s Net Worth Is 40x Greater Than a Renter’s | MyKCM

Owning a home is a great way to build family wealth.

For many families, homeownership serves as a form of ‘forced savings.’ Every time you pay your mortgage, you’re contributing to your net worth by increasing the equity you have in your home (See chart below):A Homeowner’s Net Worth Is 40x Greater Than a Renter’s | MyKCMThe impact of home equity is part of why Gallup reports that Americans picked real estate as the best long-term investment for the seventh year in a row. According to this year’s survey, 35% of Americans chose real estate over stocks, savings accounts, gold, and bonds.

Today, there are great opportunities available for those planning to buy a home. The housing market has made a full recovery, and all-time low interest rates are giving homebuyers a big boost in purchasing power. If you’re ready, buying a home this fall can set you up to increase your net worth and create a safety net for your family’s future.

Bottom Line

To learn how you can use your monthly housing cost to build your family’s net worth, let’s connect so you have a trusted professional to guide you through the homebuying process.kmi

 

 

 

 

 

Move-Up vs. Second Home: Which One Is Right For You?

 

 

The pandemic has changed the way many of us live, work, and attend school—and those changes have impacted our priorities when it comes to choosing a home.

 

According to a recent survey by The Harris Poll, 75% of respondents who have begun working remotely would like to continue doing so—and 66% would consider moving if they no longer had to commute as often. Some of the top reasons were to gain a dedicated office space (31%), a larger home (30%), and more rooms overall (29%).1

 

And now that virtual school has become a reality for many families, that need for additional space has only intensified. A growing number of buyers are choosing homes further from town as they seek out more room and less congestion. In fact, a recent survey found that nearly 40% of urban dwellers had considered leaving the city because of the COVID-19 outbreak.2

 

But not everyone is permanently sold on suburban or rural life. Instead, some are choosing to purchase a second home as a co-primary residence or frequent getaway. Without the requirements of a five-day commute, many homeowners feel less tethered to their primary residence and are eager for a change of scenery after spending so much time at home.

 

If you’re feeling cramped in your current space, you’ve probably considered a move. But what type of home would suit you best: a move-up home or a second home? Let’s explore each option to help you determine which one is right for you.

 

 

WHY CHOOSE A MOVE-UP HOME?

 

A move-up home is typically a larger or nicer home. It’s a great choice for families or individuals who simply need more space, a better location, or want features their current home doesn’t offer—like an inground pool, a different floor plan, or a dedicated home office.

 

Most move-up buyers choose to sell their current home and use the proceeds as a downpayment on their next one. If you’re struggling with a lack of functional or outdoor space in your current home, a move-up home can greatly improve your everyday life. And with mortgage rates at their lowest level in history, you may be surprised how much home you can afford to buy without increasing your monthly payment.3,4

 

To learn more about mortgage rates, contact us for a free copy of our recent report!
“Lowest Mortgage Rates in History: What It Means for Homeowners and Buyers”

 

One major benefit of choosing a move-up home is that you can typically afford a nicer place if you spend your entire budget on one property. However, if you’re longing for that vacation vibe, a second home may be a better choice for you.

 

 

WHY CHOOSE A SECOND HOME?

 

Once reserved for the ultra-wealthy, second homes have become more mainstream. Home sales are surging in many resort and bedroom communities as city dwellers search for a place to escape the crowds and quarantine in comfort.5 And with air travel on hold for many families, some are channeling their vacation budgets into vacation homes that can be utilized throughout the year.

 

A second home can also be a good option if you’re preparing for retirement. By purchasing your retirement home now, you can lock in a low interest rate, start paying down the mortgage, and begin enjoying the perks of retirement living while you’re still fit and active. Plus, it’s easier to qualify for a mortgage while you’re employed, although you may be charged a slightly higher interest rate than on a primary home loan.6

 

One advantage of choosing a second home is that you can offset a portion of the costs—and in some cases turn a profit—by renting it out on a platform like Airbnb or Vrbo. However, be sure to consult with a real estate professional or rental management company to get a realistic sense of the property’s true income potential.

A living room in front of a window

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WHICH ONE IS RIGHT FOR ME?

 

You may read this and think: I’d really like both a move-up home AND a second home! But if you’re dealing with a limited budget (aren’t we all?), you’ll probably need to make a choice.  These three tactics can help you decide which option is right for you.

 

  1. Determine Your Time and Financial Budget

 

You may meet the bank’s qualifications to purchase a home, but do you have the time, energy, and financial resources to maintain it? This is an important question to ask yourself, no matter what type of home you choose.

 

Most buyers realize that a second home will mean double mortgages, utilities, taxes, and insurance. But consider all the extra time and expense that goes into maintaining two properties. Two lawns to mow. Two houses to clean. Two sets of systems and appliances that can malfunction. Second homes aren’t always a vacation. Make sure you’re prepared for the labor and carrying costs that go into maintaining another residence.

 

Of course, some move-up homes require more work than a second home. For example, if your move-up option is a major fixer-upper, you’ll probably invest more energy and capital than you would on a small vacation condo by the beach. Have an honest discussion about how much time and money you want to spend on your new property. Would a move-up home or a second home be a better fit given your parameters?

 

  1. Rank Your Priorities

 

If you’re still undecided, make a wish list of the characteristics you’d like in your new home. Then rank each item from most to least important. This exercise can help you determine your “must-have” features—and which ones you may need to sacrifice or delay. Here’s a sample to help you get started:

 

#

FEATURE

 

Dedicated home office

 

Extra bedroom

 

Pool

 

Walk to the beach

 

Big backyard

 

Close to friends and family

 

Short commute to the office

 

Investment potential

 

 

  1. Explore Your Options

 

Once you’ve determined your parameters and priorities, it’s time to begin your home search.

If you’re still not sure whether a move-up home or a second home is right for you, we can help.

 

Contact us to schedule a free consultation. We’ll discuss your options and help you assess the pros and cons of each, given your unique circumstances.

 

We can also send you property listings for both move-up homes and second homes within your budget so you can better envision each scenario. Sometimes, viewing listings of homes that meet your criteria can make the decision clear.

 

 

LET’S GET MOVING

 

Whether you’re ready to make a move or need help weighing your options, we’d love to help. We can determine your current home’s value and show you local properties that fit within your budget. Or, if your heart is set on a second home in another market, we can refer you to an agent in your dream locale. Contact us today to schedule a free, no-obligation consultation!

 

 

Sources:

  1. Zillow -
    https://www.zillow.com/research/coronavirus-remote-work-suburbs-27046/
  2. The Harris Poll -
    https://theharrispoll.com/should-you-flee-your-city-almost-40-have-considered-it-during-the-pandemic/
  3. MarketWatch -
    https://www.marketwatch.com/story/mortgage-rates-keeping-falling-so-will-they-finally-drop-to-0-2020-08-13
  4. Toronto Star -
    https://www.thestar.com/business/2020/08/07/you-can-get-a-fixed-rate-as-low-as-184-per-cent-which-is-unbelievable-low-mortgage-rates-driving-up-home-prices.html
  5. Kiplinger -
    https://www.kiplinger.com/real-estate/buying-a-home/601091/timely-reasons-to-buy-a-vacation-home
  6. The Press-Enterprise -
    https://www.pe.com/2018/11/17/5-tips-on-when-should-you-buy-a-retirement-house-hint-before-you-quit-work/

 

 

 

 

Just listed a gorgeous home on the east side of town, MLS#1853498, 6965 Battle Mountain Rd. 3/4 bed, 4 bath, 2 car, built in 1994, with almost 1800sf. Let me know if you would like to take a look. $330k

Chris Cooper

The Cutting Edge, Realtors

719-460-2925

Chris@CoRealEstate.com

18
Oct

What Do Past Years Tell Us About Today's Real Estate Market?

What Do Past Years Tell Us About Today’s Real Estate Market?

What Do Past Years Tell Us About Today’s Real Estate Market? | MyKCM
 

As you follow the news, you’re likely seeing headlines discussing what’s going on in today’s housing market. Chances are high that some of the more recent storylines you’ve come across mention terms like cooling or slowing when talking about where the market is headed.

But what do these terms mean? The housing market today is anything but normal, and it’s still an incredibly strong sellers’ market, especially when compared to the few years leading up to the pandemic. With that in mind, what can previous years tell us about today’s real estate market and if it’s truly slowing?

We’re Still Seeing an Above Average Number of Sales

You may see headlines about a drop in home sales. But are those headlines telling the full story? The most recent Existing Home Sales Report from the National Association of Realtors (NAR) does show a drop of about 2% from July to August. But the month-over-month decline doesn’t provide the full picture (see graph below):What Do Past Years Tell Us About Today’s Real Estate Market? | MyKCMAs the graph shows, historical context is key. Today’s home sales are well ahead of some of the more normal years that led up to the health crisis. That means buyers are still in the market, which is great news if you’re planning to list your home.

Houses Are Selling Faster Than Usual

When headlines mention the market is slowing, sellers may naturally wonder if their house will sell as quickly as they’d like. According to the most recent Realtors Confidence Index from NAR, homes are still selling at record speed (see graph below):What Do Past Years Tell Us About Today’s Real Estate Market? | MyKCMAgain, if we look back at data from previous years, we can see the average time on market – 17 days –  means homes are selling faster than a normal pace.

Bidding Wars Are Still the Norm

The Realtors Confidence Index from NAR also shows a drop in the average number of offers homes are receiving in August, and many headlines may simply focus there without providing the important context (see graph below):What Do Past Years Tell Us About Today’s Real Estate Market? | MyKCMAgain, it’s important to compare today’s market to trends from recent years. Currently, the average number of offers per listing is higher than 39 of the previous 45 months. That means the likelihood of a bidding war on your home is still high. And the number of offers your house receives can have a major influence on the final sale price.

So, Is the Market Slowing Down?

While there are slight declines in various month-to-month data, it’s important to keep historical context in mind when determining what’s happening in today’s market. Odeta Kushi, Deputy Chief Economist at First American, put it best recently, saying:

“It's not the white-hot market from earlier in the year & it's not the 2020 market benefiting from a wave of pent-up demand but make no mistake this is still a hot housing market.”

Bottom Line

Don’t let headlines make you rethink listing your home this fall. Selling today means you can still take advantage of high buyer demand, multiple offers, and a quick sale. If you’re thinking of selling your house, let’s connect and discuss why this fall is the perfect time to do so.

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