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1376

(English) Future House Prices: A Look into the Crystal Ball

May 21, 2014

(English) Today, many real estate conversations center on housing prices and where they may be headed. That is why the Home Price Expectation Survey is a great barometer. Every quarter, Pulsenomics surveys a nationwide panel of over one hundred econ...

1376

(English) FSBO Millionaires Use Real Estate Agents

May 20, 2014

(English) We pride ourselves on the quality of real estate information we deliver each and every day. We try to gather empirical evidence to validate the positions we take. We do not use just an anecdotal story to make a point. We also do not get cau...

1376

(English) The Importance of the Latino Community to Today's Real Estate Market

May 15, 2014

(English) The Hispanic community was hit hardest by the housing crash. Now that the market is recovering, many of these families have the opportunity to either buy a home again, or those that lost home value during those years, are seeing equity retu...

1376

(English) 5 Reasons to Hire a Real Estate Professional

May 14, 2014

(English) Whether you are buying or selling a home, you need an experienced Real Estate Professional to lead you toward your ultimate goal. In this world of instant gratification and Internet searches, many sellers think that they can For Sale by Own...

1376

(English) 41% of Americans Would Prefer to Build Their Home

May 12, 2014

(English) A recent study by Harris Poll revealed that, for the same price, forty one percent of Americans would prefer to buy a newly built home instead of an existing home. Twenty one percent prefer an existing home while thirty eight percent didn’...

1376

(English) A Great Reason to Sell Now

May 08, 2014

(English) The price of any item (including residential real estate) is determined by ‘supply and demand’. If many people are looking to buy an item and the supply of that item is limited, the price of that item increases. According to the National...

1376

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[agents_bottom_line] => (English) Today's post is written by Steve Harney of Keeping Current Matters.

I have been a subscriber to the Wall Street Journal (WSJ) for as long as I can remember. In my opinion, it is the single greatest source of financial information and insights available. I don’t always agree with their analysis but I always respect their position.

However, in an article this past weekend, The New Math of Renting vs. Buying, they flat out got it wrong. Below are a few excerpts from the article and the reason why I believe the analysis to be incorrect.
The Cost of Renting is Lower than the Cost of Owning
In the article, they discuss that homeownership is more expensive than renting in many large metropolitan areas.

"The monthly cost of renting was lower than buying in 20 large metropolitan areas at the end of last year, the most recent period for which data are available, according to figures provided exclusively to The Wall Street Journal by Deutsche Bank. That is up from 15 large metropolitan areas a year earlier.”

The challenge is that more recent data from two very reliable sources has shown that not to be the case. Among the 35 largest metro areas analyzed by Zillow in the first quarter, every metro showed it would be cheaper to buy than rent if you plan to live in the home for at least 4.2 years.

According to a study by Trulia:

“Homeownership remains cheaper than renting nationally and in all of the 100 largest metro areas. Rising mortgage rates and home prices have narrowed the gap over the past year, though rates have recently dropped and price gains are slowing. Now, at a 30-year fixed rate of 4.5%, buying is 38% cheaper than renting nationally.” (emphasis added)
Renters Don’t Have All the Expenses of Homeowners
The article goes on to explain that as a renter you have many less expenses than you would have as a homeowner:

"Renters, for example, don't pay property taxes, homeowner's insurance and, in most cases, maintenance costs. These expenses can cost homeowners about 3% of the price of their home annually, experts say.

While those costs can be folded into monthly rent, apartment renters often pay a smaller share as landlords spread the costs among many tenants, says Stijn Van Nieuwerburgh, director of the Center for Real Estate Finance Research at New York University. If a window breaks or the toilet plugs up, your landlord—not you—pays for the repairs."

Don’t kid yourself – the landlord does not pay the taxes nor pay for repairs. The tenant does. It is incorporated in the rent. It is true, if it is an apartment building, that the property taxes are shared by all tenants. However, realize that the amount of property taxes for an apartment building with “many tenants” will be far greater than a single family residence.

We think this situation is best explained by Eric Belsky, Managing Director of the Joint Center of Housing Studies at Harvard University, in his paper on homeownership - The Dream Lives On: the Future of Homeownership in America:

“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.” (emphasis is mine)
Investing the Difference in Payments Will Net a Renter More Money
The WSJ article claims that, if a renter invests the difference between their rent payment and a potential mortgage payment had they purchased, they would be better off financially in the long run.

"Renters don't end up with a valuable asset, as buyers do when they pay off a mortgage. But renters might be able to make more money by investing the monthly savings, as well as the cash they would otherwise use for a down payment, he says."

They go on to explain their reasoning as follows:

"The value of the average single-family home increased by 3.6% a year in the three decades through 2013, compounded annually, according to mortgage giant Freddie Mac. By contrast, the compound annual return on the S&P 500 over that period was 11.1%, according to Chicago-based investment-research firm Morningstar."

As to the idea that the return on investment would be greater by investing in the stock market rather than purchase a home, I think the article in the WSJ forgot that housing is a leveraged investment. Belsky, in his paper, explains:

“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

That 3.6% average annual appreciation is really an 18% return on cash to a home buyer putting down 20%.

They also assume the renter will save any difference in housing expense. However, that does not happen in reality. In their ongoing research for their paper, Beer and Cookies Impact on Homeowners’ Wealth Accumulation, Eli Beracha and Ken H. Johnson reveal that homeownership creates a ‘forced savings’ plan:

“It appears that homeownership creates extra wealth mainly through its ability to force owners to save rather than through property appreciation. Thus, homeownership appears to be a self-imposed savings plan, which through time leads to greater wealth accumulation as compared to comparable renters. In short, buying a home makes Americans save.”

And Belsky from Harvard agrees:

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

To further make this point, we can look at a study by the Federal Reserve which showed that the net worth of a homeowner ($174,500) is 30 times greater than that of renter ($5,100).
Bottom Line
Looking at financial advantages of homeownership from every angle still reveals that it is a much better investment than renting.
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[contents] => (English) Today's post is written by Steve Harney of Keeping Current Matters.

I have been a subscriber to the Wall Street Journal (WSJ) for as long as I can remember. In my opinion, it is the single greatest source of financial information and insights available. I don’t always agree with their analysis but I always respect their position.

However, in an article this past weekend, The New Math of Renting vs. Buying, they flat out got it wrong. Below are a few excerpts from the article and the reason why I believe the analysis to be incorrect.
The Cost of Renting is Lower than the Cost of Owning
In the article, they discuss that homeownership is more expensive than renting in many large metropolitan areas.

"The monthly cost of renting was lower than buying in 20 large metropolitan areas at the end of last year, the most recent period for which data are available, according to figures provided exclusively to The Wall Street Journal by Deutsche Bank. That is up from 15 large metropolitan areas a year earlier.”

The challenge is that more recent data from two very reliable sources has shown that not to be the case. Among the 35 largest metro areas analyzed by Zillow in the first quarter, every metro showed it would be cheaper to buy than rent if you plan to live in the home for at least 4.2 years.

According to a study by Trulia:

“Homeownership remains cheaper than renting nationally and in all of the 100 largest metro areas. Rising mortgage rates and home prices have narrowed the gap over the past year, though rates have recently dropped and price gains are slowing. Now, at a 30-year fixed rate of 4.5%, buying is 38% cheaper than renting nationally.” (emphasis added)
Renters Don’t Have All the Expenses of Homeowners
The article goes on to explain that as a renter you have many less expenses than you would have as a homeowner:

"Renters, for example, don't pay property taxes, homeowner's insurance and, in most cases, maintenance costs. These expenses can cost homeowners about 3% of the price of their home annually, experts say.

While those costs can be folded into monthly rent, apartment renters often pay a smaller share as landlords spread the costs among many tenants, says Stijn Van Nieuwerburgh, director of the Center for Real Estate Finance Research at New York University. If a window breaks or the toilet plugs up, your landlord—not you—pays for the repairs."

Don’t kid yourself – the landlord does not pay the taxes nor pay for repairs. The tenant does. It is incorporated in the rent. It is true, if it is an apartment building, that the property taxes are shared by all tenants. However, realize that the amount of property taxes for an apartment building with “many tenants” will be far greater than a single family residence.

We think this situation is best explained by Eric Belsky, Managing Director of the Joint Center of Housing Studies at Harvard University, in his paper on homeownership - The Dream Lives On: the Future of Homeownership in America:

“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.” (emphasis is mine)
Investing the Difference in Payments Will Net a Renter More Money
The WSJ article claims that, if a renter invests the difference between their rent payment and a potential mortgage payment had they purchased, they would be better off financially in the long run.

"Renters don't end up with a valuable asset, as buyers do when they pay off a mortgage. But renters might be able to make more money by investing the monthly savings, as well as the cash they would otherwise use for a down payment, he says."

They go on to explain their reasoning as follows:

"The value of the average single-family home increased by 3.6% a year in the three decades through 2013, compounded annually, according to mortgage giant Freddie Mac. By contrast, the compound annual return on the S&P 500 over that period was 11.1%, according to Chicago-based investment-research firm Morningstar."

As to the idea that the return on investment would be greater by investing in the stock market rather than purchase a home, I think the article in the WSJ forgot that housing is a leveraged investment. Belsky, in his paper, explains:

“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

That 3.6% average annual appreciation is really an 18% return on cash to a home buyer putting down 20%.

They also assume the renter will save any difference in housing expense. However, that does not happen in reality. In their ongoing research for their paper, Beer and Cookies Impact on Homeowners’ Wealth Accumulation, Eli Beracha and Ken H. Johnson reveal that homeownership creates a ‘forced savings’ plan:

“It appears that homeownership creates extra wealth mainly through its ability to force owners to save rather than through property appreciation. Thus, homeownership appears to be a self-imposed savings plan, which through time leads to greater wealth accumulation as compared to comparable renters. In short, buying a home makes Americans save.”

And Belsky from Harvard agrees:

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

To further make this point, we can look at a study by the Federal Reserve which showed that the net worth of a homeowner ($174,500) is 30 times greater than that of renter ($5,100).
Bottom Line
Looking at financial advantages of homeownership from every angle still reveals that it is a much better investment than renting.
[created_at] => 2014-05-06T06:00:55Z
[description] => (English) Today's post is written by Steve Harney of Keeping Current Matters.

I have been a subscriber to the Wall Street Journal (WSJ) for as long as I can remember. In my opinion, it is the single greatest source of financial information and ins...
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[title] => (English) Homeownership: This Time the Wall Street Journal Got it Wrong
[updated_at] => 2014-05-06T14:26:33Z
[url] => /es/2014/05/06/homeownership-this-time-the-wall-street-journal-got-it-wrong/
)

(English) Homeownership: This Time the Wall Street Journal Got it Wrong

May 06, 2014

(English) Today's post is written by Steve Harney of Keeping Current Matters. I have been a subscriber to the Wall Street Journal (WSJ) for as long as I can remember. In my opinion, it is the single greatest source of financial information and ins...

1376

(English) 3 Reasons to Sell Your Home this Spring

May 05, 2014

(English) Many sellers are still hesitant about putting their house up for sale. Where are prices headed? Where are interest rates headed? These are all valid questions. However, there are several reasons to sell your home sooner rather than later. H...

1376

(English) Shiller ‘FINE’ with his Son Buying a Home

April 30, 2014

(English) In a recent interview on CNBC’s ‘Squawk Box’, Robert Shiller, Nobel Prize-winning economist and founder of the Case Shiller Price Index, discussed today’s housing market in a rather personal way. Shiller first commented that he believes...

1376

(English) FreddieMac: Housing is Stronger Today

April 29, 2014

(English) In a recent blog post, FreddieMac explained that “housing is stronger today than at any point since the Great Recession began and hit bottom in 2009”. They then gave three reasons which support their position: Home sales are up 13% sinc...

1376

(English) Gallup Poll: Real Estate Best Long Term Investment

April 28, 2014

(English) The Gallup organization just released their April Economy and Personal Finances Poll which asked Americans to choose the best option for long term investment. It was no surprise to us that real estate returned to the top position over other...

1376

(English) With Rates & Prices on the Rise, Do You Know the True Cost of Waiting?

April 22, 2014

(English) There is a great opportunity that exists now for Millennials who are willing and able to purchase a home NOW... Here are a couple other ways to look at the cost of waiting. Let’s say you're 30 and your dream house costs $250,000 today, a...

1376

Either Way, You’re Still Paying a Mortgage

April 21, 2014

(English) There are some people that have not purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with our parents rent free, you are paying a mortgage - either y...

1376

(English) Real Estate: This Spring Will Be Different

April 17, 2014

(English) Just like May flowers, every spring the housing market blossoms as buyers come out ready to purchase their dream house. This spring, we believe we are going to see the strongest purchasing market we have seen in a decade. Why are we so b...

1376

Thinking of Buying a Vacation/Retirement Home? Why Wait?

April 15, 2014

(English) The sales of vacation homes skyrocketed last year. A recent study also revealed that 25% of those surveyed said they’d likely buy a second home, such as a vacation or beach house, to use during retirement. For many Baby Boomers, the idea of...

1376

¿Quiere Vender su casa? ¡Póngale el precio correcto!

April 14, 2014

(English) The housing market is recovering nicely. Prices have increased nationally by double digits over the last twelve months. Competition from the shadow inventory of lower priced distressed properties (foreclosures and short sales) is diminishin...

1376

(English) Vacation Home Property Sales Surge

April 10, 2014

(English) The American desire to own a second home as a vacation home is alive and well! The National Association of Realtors analysis of U.S. Census Bureau data shows there are approximately 8 million vacation homes in the U.S. Their 2014 Investmen...

1376

(English) 3 Reasons to Sell Your Home this Spring

April 08, 2014

(English) Many sellers are still hesitant about putting their house up for sale. Where are prices headed? Where are interest rates headed? These are all valid questions. However, there are several reasons to sell your home sooner rather than later. H...

1376

(English) A Home’s Cost vs. Price Explained

April 07, 2014

(English) We have often talked about the difference between COST and PRICE. As a seller, you will be most concerned about ‘short term price’ – where home values are headed over the next six months. As either a first time or repeat buyer, you must not...

1376

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    [agents_bottom_line] => (English) A recent survey by the PulteGroup revealed that the Millennial generation has a more optimistic outlook regarding the American economy than other generations. According to the survey, 54% of Millennials believe the economy is in better shape today than it was last year compared to only 41% of the total population.

It seems this optimism is impacting purchasing decisions as 74% of Millennials view now as an excellent or good time to buy the things they want or need. Jim Zeumer, vice president of corporate communications for the PulteGroup explained:

"No other cohort of adults is nearly as confident about their economic future as the millennials are right now. This is definitely a change, as millennials have regularly been viewed as the disenfranchised generation vastly affected by the fallout of the recession.  But now, with an increased sense of optimism, this generation is starting to feel as though they have the resources available to lead the lives they want or expect to in the future."
WHAT ABOUT HOUSING?
Specific to real estate, the survey indicated:

	85% of Millennials plan to purchase a home in the future
	49% plan to purchase a home in the next two years
	Of those planning to purchase in the near-term, 56 percent are current homeowners and 41 percent are renters
	65% prefer spending more money on a home that is move-in ready compared to doing renovations
	58% increased their interest in purchasing a home in the past year as the positive attributes of homeownership resonate with this generation.

    [assets] => Array
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    [can_share] => no
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        (
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    [content_type] => blog
    [contents] => (English) A recent survey by the PulteGroup revealed that the Millennial generation has a more optimistic outlook regarding the American economy than other generations. According to the survey, 54% of Millennials believe the economy is in better shape today than it was last year compared to only 41% of the total population.

It seems this optimism is impacting purchasing decisions as 74% of Millennials view now as an excellent or good time to buy the things they want or need. Jim Zeumer, vice president of corporate communications for the PulteGroup explained:

"No other cohort of adults is nearly as confident about their economic future as the millennials are right now. This is definitely a change, as millennials have regularly been viewed as the disenfranchised generation vastly affected by the fallout of the recession.  But now, with an increased sense of optimism, this generation is starting to feel as though they have the resources available to lead the lives they want or expect to in the future."
WHAT ABOUT HOUSING?
Specific to real estate, the survey indicated:

	85% of Millennials plan to purchase a home in the future
	49% plan to purchase a home in the next two years
	Of those planning to purchase in the near-term, 56 percent are current homeowners and 41 percent are renters
	65% prefer spending more money on a home that is move-in ready compared to doing renovations
	58% increased their interest in purchasing a home in the past year as the positive attributes of homeownership resonate with this generation.

    [created_at] => 2014-03-31T06:00:50Z
    [description] => (English) A recent survey by the PulteGroup revealed that the Millennial generation has a more optimistic outlook regarding the American economy than other generations. According to the survey, 54% of Millennials believe the economy is in better shap...
    [expired_at] => 
    [featured_image] => https:///
    [id] => 9
    [published_at] => 2014-03-31T10:00:50Z
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    [slug] => millennials-optimistic-ready-to-buy
    [status] => published
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        (
        )

    [title] => (English) Millennials: Optimistic & Ready to Buy
    [updated_at] => 2014-06-12T20:21:53Z
    [url] => /es/2014/03/31/millennials-optimistic-ready-to-buy/
)

(English) Millennials: Optimistic & Ready to Buy

March 31, 2014

(English) A recent survey by the PulteGroup revealed that the Millennial generation has a more optimistic outlook regarding the American economy than other generations. According to the survey, 54% of Millennials believe the economy is in better shap...

1376

(English) Will 20% Soon Be the Minimum Down Payment on a Home?

January 23, 2013

(English) Several government agencies are reviewing data to determine what will be the minimum down payment required under the new Qualified Residential Mortgage (QRM) guidelines scheduled to be revealed in the next few months. In the original Mortga...

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