Best Reasons to Buy

Most Americans prefer to live in their own home. Choosing the neighborhood we want and selecting a residence that will satisfy our lifestyle needs for years are major goals for most of us.

Enjoying the security and freedom of home ownership are the main benefits we should focus on when buying. Having these daily comforts is the primary reason Americans aspire to be homeowners.

Yet the advantages of owning don’t end there. Homeowners also tend to see their residence go up in value at a faster pace than the rate of inflation.

This trend has remained stable for generations in the U.S. Analysts say it’s because the value of the land under our homes keeps going up.

NO MORE LAND

America’s increasing population demands that we keep building properties in order for families to have a place to live. Yet our supply of buildable land is limited.

New homes often are constructed further out, forcing owners to make longer daily commutes. So it’s not surprising that existing owners find the values of their more-convenient homes to be on an upward slant.

Property prices dropped in recent years because they had risen so fast in the years preceding the crisis that home ownership became unaffordable for the average buyer. Real estate values had to fall so households could afford to purchase again.

Now we’re moving back towards a normal housing market. Today’s buyers are able to find attractive values, and also obtain great rates on a home loan.

BIG PAYOFF

How we finance home purchases offers the third big reason that owning makes sense. Yet perhaps it’s the least-recognized advantage of homeownership.

Today’s fixed-rate mortgage gained popularity in the 1930’s. It was developed as an answer to problems encountered during America’s Great Depression.

Monthly payments are calculated to remain stable over the loan’s life. Homeowners can easily budget their expenses, and know their housing costs won’t change.

Yet they also are paying off their loan over time. While a house is going up in value, the amount owed on it is falling.

This allows American homeowners to grow their wealth over time. Someone who stays in their house and simply makes monthly payments can retire without any housing expense. Today all the strongest reasons for purchasing your own place are as true as they’ve ever been.

Advertisements

U.S. Economy Ready to Accelerate

Faster growth is heading our way, according to many economists. Today our “economy is firing on more cylinders than ever,” says Dr. James Paulsen. He notes that employment is going up and the federal deficit is falling in relation to the size of America’s overall economy.

Energy costs also could drop as new discoveries raise hopes for energy independence in the U.S. Lower fuel and power prices benefit every household and company in the country.

More jobs produce higher incomes for many Americans, points out Beacon Economics. And these positive developments are boosting the housing recovery.

Yet Beacon adds that “homes still appear to be underpriced from a long-run perspective. Home prices could rise by 35 percent or more from current levels” without being overpriced.

BETTER DAYS AHEAD

Numerous economists predict growth will be stronger in the second half of 2013, due in large part to increased job creation. While we may experience periods of reduced demand, the overall outlook remains one of sustainable progress, say many economists. Other experts believe we may be surprised by the vibrancy of economic activity in the near future.

Mortgage rates have edged upwards from all-time lows in recent weeks. Yet that also is a positive sign, since it suggests markets are foreseeing faster economic growth in the future.

Generally it’s best to buy a home when it suits your financial circumstances and lifestyle needs, rather than trying to time the real estate market. Enjoying affordable payments on a terrific place to live are huge positives.

Homeowners also gain tax advantages and can watch their property increase in value. Our normalizing real estate market should continue providing these great benefits in coming years. 

Gain What You Deserve

Most homeowners are finding their property’s value has risen in recent months. Besides making you feel better, that news can help you refinance on better terms.

            Increased equity is a plus when you’re refinancing. Yet many homeowners with loan amounts greater than their property’s current value also can refinance today.

            Higher home prices across the nation show that real estate has reached “a turning point,” according to economist Diane Swonk. “What was once an overhang in homes for sale has become a shortage,” she explains.

INCREASED DEMAND

            Swonk forecasts a twelve percent increase in home sales this year. “Home prices are expected to rise between six and eight percent,” she adds.

            Market fluctuations usually overshoot their long-term trends, states John Burns Real Estate Consulting. Several years ago home prices advanced faster than normal, the firm notes in a commentary.

Since then property values have fallen sharply in many areas. Yet the cycle has turned, John Burns states. “The case is very strong that the bottom is essentially defined and there is a great deal of room for recovery.”

A strengthening in real estate markets “in itself creates a major force driving appreciation of home prices over the next several years,” Burns adds. “A substantial recovery is not only possible but likely.”

Real Estate Prices Head Higher

“Home prices accelerate” sums up the most-recent commentary from the S&P Dow Jones Indices. Every area of the country is posting year-over-year price gains.

Other indicators also point out the housing market’s strength, comments S&P Dow Jones. Foreclosures are down and new home construction is sharply higher over the past twelve months.

Low mortgage rates and better employment prospects in many areas are making consumers more confident about purchasing a residence now. Economists say homeowners on average can expect their properties to be worth at least five percent more a year from now.

One adds that if mortgage rates stay low, “home values could surge 35 percent without stretching housing affordability,” according to the National Association of Realtors (NAR). Valuation firm Veros Real Estate Solutions states “the national real estate market has hit bottom and is now in a full recovery.”

Healthy job growth and pent-up demand for residences are contributing to home sales, adds NAR. A stronger real estate market provides a boost to America’s economy, as well. Building and furnishing houses creates many jobs for U.S. workers. 

Homebuyers are Stepping Up

A shortage of houses available for purchase is causing real estate prices to increase in many communities. Buyers are discovering if they don’t act decisively once they’ve found a property that suits them, they could wind up disappointed.

Every home is individual, so it’s helpful to be ready to make a competitive offer when you spot a residence that’s right for you. Knowing how much you can spend while maintaining realistic payments is crucial to completing a smart transaction.

Young Americans in particular are excited about their home buying prospects. Baby boomers’ children – the “millennial generation” – now are between the ages of 18 and 34, and ready to make their mark on the world.

READY TO OWN

Currently they’re entering the prime period of life for starting a household and buying your own place. Sheer numbers could mean a rush by millennials to buy houses would have a big impact on real estate markets.

Today the millennials are a larger demographic group than the baby boomers. And a recent survey reveals that millennials want ample living space.

About 90 million Americans are millennials. “An onslaught of this group into the housing industry could create a boom larger than anything the U.S. has ever seen before,” observes Yahoo! Finance.

Escalating rents also are encouraging millennials to buy homes. Their baby boomer parents are supportive, since they’re eager for their offspring to set up their own households.

Today’s Strategies for Success

Changing market conditions call for new approaches to buying and selling residences. Owners who need to move but aren’t sure they can sell for the price they want have several options to mull.

First, they can turn their current property into a rental unit. Income properties provide additional tax benefits that other owners can’t claim.

Or they may be able to attract a great tenant by offering a lease with an option to purchase the house in the future. Good prospects for this approach are households with solid incomes who can’t obtain a mortgage now. Typically they’ve either had past credit issues, or haven’t yet saved enough for a down payment.

You’ll be helping someone gain a clear path to homeownership. In exchange for an above-market rent, you’ll credit some of their lease payments as a down payment on your home.

But you’ll probably find it’s much easier to sell your current house for a good price now than it was a year or so ago. In fact, many areas of the country are experiencing a shortage of properties on the market.

TIME TO BUY

House values are advancing over much of the nation as a result. Some buyers are responding to these conditions by putting “escalation clauses” in their offers to sellers.

Doing so lets you boost your bid if you need to gain an advantage on other potential purchasers.

For instance, your offer may state that you’ll top any other offer by $2,500, up to a set limit. If you offer $220,000 and have an escalation clause up to $240,000, then you can come out ahead even if someone else offers $230,000 on that home.

Understanding today’s market dynamics can help you come out ahead when buying or selling real estate.

Our Bright Futures

Rising home prices are helping many Americans build equity, and gain more financial security. Last year close to two million homeowners were lifted out of negative equity, reports Zillow Inc. Another one million households will find their home’s value has risen above what they owe in 2013, Zillow forecasts.

Looking at traditional benchmarks indicates that real estate is anywhere from seven to 20 percent undervalued now, states The Economist. Comparing the price of homes to both average rents and household incomes reveals that real estate remains at bargain levels.

“It also helps that mortgage rates are at historic lows and are likely to stay that way, since the Federal Reserve has promised to keep an extremely loose monetary stance for the next couple of years,” The Economist observes.

Real estate “is usually a hedge against inflation,” adds The Economist. It notes that some analysts predict property values in the U.S. will move up faster than stock prices over the next ten years. “The surprise asset class of the next decade could yet be property.”

HEADING HIGHER

Stronger property sales and higher prices suggest the real estate downturn is over. Folks who continue waiting to purchase probably won’t enjoy the same terrific borrowing terms and bargain prices.

Already some communities have a shortage of houses for sale, NAR reports. “Buyer traffic is continuing to pick up, while seller traffic is holding steady,” explains NAR’s chief economist. “In fact, buyer traffic is 40 percent above a year ago, so there is plenty of demand but insufficient inventory.”

Homes listed for sale are at their lowest point since April 2005, NAR adds. Over the past year the inventory of sale properties has fallen by 25 percent.

Not surprisingly, houses are selling on average four weeks faster than they did twelve months ago. Purchase contract signings also rose sharply in January, says NAR, “and have been above year-ago levels for the past 21 months.” More purchases and a limited supply of houses for sale continue to push real estate prices upwards. 

Rising Prices Signal Stronger Market

Home prices continue to show healthy increases across the U.S. this year. Average property values are 5.5 percent higher over the last twelve months, according to the S&P/Case-Shiller Home Price

Nineteen out of 20 cities where S&P/Case-Shiller collects data experienced higher real estate prices over the last year. Some areas which previously had seen greater weakness in values are rebounding

For example, prices in Phoenix have gone up almost 23 percent over the past twelve months, says S&P/Case-Shiller. “Housing is clearly recovering,” adds an S&P/Case-Shiller official.

“Prices are rising as are both new and existing home sales,” he adds. Sales of pre-owned homes recently reached their largest monthly total in three years.

Sales of new homes also hit their highest point since June 2010. New home sales are particularly important for the economy as a whole.

Jobs are created for the people who construct these residences. New homes also require a lot of materials – ranging from windows and carpets to lumber and pipes – and those purchases further strengthen the economy.

A BETTER PICTURE

A forecast from the National Association of Realtors (NAR) calls for “a return to normalcy” in real estate markets this year. Both prices and sales will go up, NAR predicts, as rising demand causes the number of homes available for purchase to shrink.

U.S. home sales rose more than nine percent in 2012, NAR reports. Similar gains are expected this year as low rates, great prices, and more jobs make buying possible for many families.les, according to NAR.

Increased buyer interest also is sparking home sales, as an estimated one million new households were created last year. That’s 75 percent higher than the average growth in households from 2007 to 2011.

Surveys of real estate agents indicate that homes are selling faster and market conditions are improving. “Interest rates are expected to remain low,” adds NAR, “though inflation could put upward pressure on both rates and home prices.”

Boosts to the Economy

Concerns about how political events will affect our economy are valid. Yet be aware that beneath all the noise and confusion, the U.S. economy is strengthening. Here are some positive recent developments –

·         Households have reduced their debts “to the smallest percentage of after-tax income since 1983,” says Bloomberg News. Over the last six years American households have cut their total debt by 25 percent.

Having fewer monthly bills lets us increase our spending. Consumers account for 70 percent of the U.S. economy, so being able to purchase more will stimulate growth.

·         Vehicle sales have solidly rebounded. Many of these cars and trucks are manufactured in the U.S., as well.

·         Companies are bringing jobs back to this country, as they experience rising wage demands from foreign workers. “Onshoring” also reduces transport costs, and helps firms respond faster to U.S. market conditions.

                “Worry over America’s recent economic stagnation, however justified, shouldn’t obscure the fact that the American economy remains Number One in the world,” states The Wall Street Journal. “The United States holds 4.5 percent of the world’s population but produces a staggering 22 percent of the world’s output – a fraction that has remained fairly stable for two decades, despite growing competition from emerging countries.

Persons considering a long-term commitment, such as buying a home, should remind themselves that America’s growth has been leading the world for a long time. Our country’s ability to respond to challenges in new ways can’t be

We’ll always have something to be anxious about. Yet those fears shouldn’t keep us from moving ahead with our lives. Buying a home soon also lets you become part of our country’s positive growth solution.

Low Rates Help Americans

Borrowing rates remain near record lows – and well below their levels from a year ago – reports mortgage investment firm Freddie Mac. Today’s excellent rates “should continue to aid in the ongoing housing recovery,” say Freddie Mac officials.

Both home purchasers and existing owners who want to refinance are taking advantage of this opportunity to lock in low payments.  

But not only are rates lower than they were a year ago. Lenders also are making it easier for households to refinance if they’re living in a property which has dropped in value.

Many economists predict rates will rise in the future. Yet consumers who obtain a home loan now will continue to benefit from our current outstanding

Buyers are responding to attractive values on residences, as well. “Home prices are increasing across the country as low interest rates and improving employment boost demand,” states Bloomberg News.

“Higher values support consumer spending,” Bloomberg adds. What we’re seeing is the beginning of a positive economic cycle. A combination of better job prospects, great rates, and discounted house prices are encouraging consumers to purchase a

Existing owners also are eagerly refinancing, which gives them extra cash to spend as they wish. More household spending power boosts the economy – and that helps the jobs picture even more.

BIG

Refinancing homeowners saw their interest rate drop by an average of 1.8 percent in the fourth quarter of 2012, according to Freddie Mac. Typical refinancing owners reduced their rate by one-third, adds Freddie.

 That’s “the largest percentage reduction recorded” over the 27 years data has been collected, says Freddie Mac.

A strong percentage of owners increased their monthly savings further by using cash to cut their mortgage balance when refinancing. Combining lower rates and a smaller loan amount can add up to significantly lower payments.

Freddie Mac says 39 percent of Americans who got a refi in the last three months of 2012 reduced their loan balance. An average refinancing borrower with a $200,000 mortgage obtained annual savings of $3,600, Freddie Mac reports.