What is the #1 Financial Benefit of Homeownership?

What Is the #1 Financial Benefit of Homeownership?

There are many financial and non-financial benefits of homeownership, and the greatest financial one is wealth creation. Homeownership has always been the first rung on the ladder that leads to forming household wealth. As Freddie Mac explains:

“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.”

Odeta Kushi, Deputy Chief Economist at First American, also notes:

“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.”

Last week, CoreLogic released their latest Homeowner Equity Insights Report, which reveals the surge in wealth created over the last twelve months through increased home equity. The report makes five key points:

  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

Here’s a map that shows the equity gains by state:

What Is the #1 Financial Benefit of Homeownership? | MyKCM

Increasing equity is giving homeowners the power to better manage the challenges of the pandemic, especially for those spending more time at home. In the report, Frank Nothaft, Chief Economist for CoreLogic, explains:

“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.”

The financial advantage homeowners have has not gone unnoticed. In the same report, Frank Martell, President and CEO of CoreLogic, states:

“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.

Last year, the Rosen Consulting Group released a report outlining the benefits of homeownership. In that report, they explained what an increase in net worth – which they call the “wealth effect” – means to the economy:

“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

Homeownership builds wealth through equity, and this creates a positive impact for homeowners and the River Valley. Let’s connect today if you’re ready to invest in a home of your own.

5 Reasons to Sell Your House This Spring

5 Reasons to Sell Your House This Spring

When selling a house, most homeowners hope for a quick and profitable transaction that puts them in a position to make a great move. If you’re waiting for the best time to win as a seller, the market is calling your name this spring. Here are five reasons why this is the perfect time to sell your house if you’re ready.

1. There’s high demand from homebuyers.

Buyer demand is strong right now, and buyers are active in the market. ShowingTime, which tracks the average number of buyer showings on residential properties, recently announced that buyer showings are up 51.5% compared to this time last year. Daniil Cherkasskiy, Chief Analytics Officer at ShowingTime, notes:

“As anticipated, demand for real estate remains elevated and continues to be affected by low levels of inventory…On average, each home is getting 50 percent or more requests this year compared to January of last year. As we head into the busy season, it’s likely we’ll push into even more extreme territory until the supply starts catching up with demand.”

When your house is positioned to get a ton of attention from competitive buyers, you’re in the best spot possible as the seller.

2. There aren’t enough houses for sale.

Purchaser demand is so high, the market is running out of available houses for sale. Recently, realtor.com reported:

“Nationally, the inventory of homes for sale in February decreased by 48.6% over the past year, a higher rate of decline compared to the 42.6% drop in January. This amounted to 496,000 fewer homes for sale compared to February of last year.”

The National Association of Realtors (NAR) also reveals that, while home sales are skyrocketing, the inventory of existing homes for sale is continuing to drop dramatically. Houses are essentially selling as fast as they’re hitting the market – in fact, NAR reports that the average house is on the market for only 21 days.

It’s this imbalance between high buyer demand and a low supply of houses for sale that gives sellers such an advantage. A seller will always negotiate the best deal when demand is high and supply is low. That’s exactly what’s happening in the real estate market today.

3. You have a lot of leverage in today’s market.

Clearly, many more people are interested in buying than selling this spring, and this fact is just as present in Western Arkansas/Eastern Oklahoma, creating the ultimate sellers’ market. When this happens, homeowners in a position to sell have the upper hand in negotiations.

According to NAR, agents are reporting an average of 3.7 offers per house and an increase in bidding wars. As a seller, this means the ball is in your court – so much so that you can use your leverage to negotiate the best possible contract. Demand is there, and now is the perfect time to sell for the most favorable terms.

4. It’s a great way to use your home equity.

According to the latest data from CoreLogic, as of the third quarter of 2020, the average homeowner gained $17,000 in equity over the past year, and that number continues to grow as home values appreciate. Equity is a type of forced savings that grows during your time as a homeowner and can be put toward bigger goals like buying your next dream home.

Mark Fleming, Chief Economist at First American, notes:

“As homeowners gain equity in their homes, they are more likely to consider using that equity to purchase a larger or more attractive home – the wealth effect of rising equity. In today’s housing market, fast rising demand against the limited supply of homes for sale has resulted in continued house price appreciation.”

5. It’s a chance to find a home that meets your needs.

So much has changed over the past year, including what many of us need in a home. Spending extra time where we currently live is enabling many of us to re-evaluate homeownership and what we find most important in a home.

Whether it’s a house that has the features suited to working remotely, space for virtual or hybrid schooling, a home gym or theater, or something else, selling this spring gives you a chance to make a move and find the home of your dreams.

Bottom Line

Today’s housing market belongs to the sellers. If you’ve considered making a move but have been waiting for the right market conditions, your wait may be over. If you live in the Fort Smith area, or want to move to the River Valley, let’s connect so you’ll be positioned to win when you sell your house this spring.

How to Make a Winning Offer on a Home

How to Make a Winning Offer on a Home

Today’s homebuyers are faced with a strong sellers’ market, which means there are a lot of active buyers competing for a relatively low number of available homes. As a result, it’s essential to understand how to make a confident and competitive offer on your dream home, whether it’s in Fort Smith, Van Buren, or surrounding areas. Here are five tips for success in this critical stage of the homebuying process.

1. Listen to Your Real Estate Advisor

An article from Freddie Mac gives direction on making an offer on a home. From the start, it emphasizes how trusted professionals can help you stay focused on the most important things, especially at times when this process can get emotional for buyers:

“Remember to let your homebuying team guide you on your journey, not your emotions. Their support and expertise will keep you from compromising on your must-haves and future financial stability.”

A real estate professional should be the expert guide you lean on for advice when you’re ready to make an offer.

2. Understand Your Finances

Having a complete understanding of your budget and how much house you can afford is essential. The best way to know this is to get pre-approved for a loan early in the homebuying process. Only 44% of today’s prospective homebuyers are planning to apply for pre-approval, so be sure to take this step so you stand out from the crowd. Doing so make it clear to sellers you’re a serious and qualified buyer, and it can give you a competitive edge in a bidding war.

3. Be Prepared to Move Quickly

According to the latest Realtors Confidence Index from the National Association of Realtors (NAR), the average property sold today receives 3.7 offers and is on the market for just 21 days. These are both results of today’s competitive market, showing how important it is to stay agile and alert in your search. As soon as you find the right home for your needs, be prepared to submit an offer as quickly as possible.

4. Make a Fair Offer

It’s only natural to want the best deal you can get on a home. However, Freddie Mac also warns that submitting an offer that’s too low can lead sellers to doubt how serious you are as a buyer. Don’t make an offer that will be tossed out as soon as it’s received. The expertise your agent brings to this part of the process will help you stay competitive:

“Your agent will work with you to make an informed offer based on the market value of the home, the condition of the home and recent home sale prices in the area.”

5. Stay Flexible in Negotiations

After submitting an offer, the seller may accept it, reject it, or counter it with their own changes. In a competitive market, it’s important to stay nimble throughout the negotiation process. You can strengthen your position with an offer that includes flexible move-in dates, a higher price, or minimal contingencies (conditions you set that the seller must meet for the purchase to be finalized). Freddie Mac explains that there are, however, certain contingencies you don’t want to forego:

Resist the temptation to waive the inspection contingency, especially in a hot market or if the home is being sold ‘as-is’, which means the seller won’t pay for repairs. Without an inspection contingency, you could be stuck with a contract on a house you can’t afford to fix.”

Bottom Line

Today’s competitive market makes it more important than ever to make a strong offer on a home. Reach out to our team at Pillar + Post to make sure you rise to the top along the way.

Should You Buy a Retirement Home Sooner Rather than Later?

Should You Buy a Retirement Home Sooner Rather than Later?

Every day in the U.S., roughly 10,000 people turn 65. Prior to the health crisis that swept the nation in 2020, most people had to wait until they retired to make a move to the beach, the golf course, or the senior living community they were looking to settle into for their later years in life. In 2020, however, the game changed.

Many of today’s workers who are nearing the end of their professional careers, but maybe aren’t quite ready to retire, have a new choice to make: should I move before I retire? If the sand and sun are calling your name and you have the opportunity to work remotely for the foreseeable future, now may be a great time to purchase that beach bungalow you’ve always dreamed of or the single-story home in the sprawling countryside that might be a little further out of town. Whether it’s a second home or a future retirement home, spending the next few years in a place that truly makes you smile every day might be the best way to round out a long and meaningful career.

Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains:

“The pandemic was unexpected, working from home was unexpected, but nonetheless many companies realized that workers can be just as productive working from home…We may begin to see a boost in people buying retirement homes before their retirement.”

According to the 20th Annual Transamerica Retirement Survey, 3 out of 4 retirees (75%) own their homes, and only 23% have mortgage debt (including any equity loans or lines of credit). Since entering retirement, almost 4 in 10 retirees (38%) have moved into a new home. They’re making a profit by selling their current homes in today’s low inventory market and using their equity to purchase their future retirement homes. It’s a win-win. As more families move into the Fort Smith metro, we are seeing a huge need for 3 and 4+ bedroom homes, making it a perfect time to sell for anyone looking to downsize space.

Why These Homeowners Are Making Moves Now

The health crisis over the last year made us all more aware of the importance of our family and friends, and many of us have not seen our extended families since the pandemic started. It’s no surprise, therefore, to see in the same report that 32% of those surveyed cited the top reason they’re making a move is that they want to be closer to family and friends (See graph below):Should You Buy a Retirement Home Sooner Rather than Later? | MyKCM

The survey also revealed that 73% percent of retirees currently live in single-family homes. With the overall number of homes for sale today hitting a historic low, and with the buyer demand for single-family homes skyrocketing, there’s never been a more ideal time to sell a single-family home and make a move toward retirement. Today’s market has the perfect combination of driving forces to make selling optimal, especially while buyers are looking to take advantage of low interest rates.

If you’re one of the 73% of retirees with a single-family home and want to move closer to your family, now is the time to put your house on the market. With the pace homes are selling today, you could essentially wrap up your move – start to finish – before the holidays.

Bottom Line 

Whether you’re looking to fully retire or to buy a second home with the intent to use it as your retirement home in the future, the current housing market may very well work in your favor. Connect with a Pillar + Post agent today to discuss your options in the Fort Smith/Van Buren market.

How Much Leverage Do Today’s House Sellers Have?

How Much Leverage Do Today’s House Sellers Have?

The housing market has been scorching hot over the last twelve months. Buyers and their high demand have far outnumbered sellers and a short supply of houses. According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), sales are up 23.7% from the same time last year while the inventory of homes available for sale is down 25.7%. There are 360,000 fewer single-family homes for sale today than there were at this time last year. This increase in demand coupled with such limited supply is leading to more bidding wars throughout the country.

Rose Quint, Assistant Vice President for Survey Research with the National Association of Home Builders (NAHB), recently reported:

“The number one reason long-time searchers haven’t made a home purchase is not because of their inability to find an affordably-priced home, but because they continue to get outbid by other offers.”

A survey in the NAHB report showed that 40% of buyers have been outbid for a home they wanted to purchase. This is more than twice the percentage in 2019, which was 19%.

What does this mean for sellers today?

It means sellers in Fort Smith, and surrounding areas, have tremendous leverage when negotiating with buyers.

In negotiations, leverage is the power that one side may have to influence the other side while moving closer to their negotiating position. A party’s leverage is based on its ability to award benefits or eliminate costs on the other side.

In today’s market, a buyer wants three things:

  1. To buy a home
  2. To buy now before prices continue to appreciate
  3. To buy now and take advantage of historically low mortgage rates while they last

These three buyer needs give the homeowner tremendous leverage when selling their house. Most realize this leverage enables the seller to sell at a good price. However, there may be another need the seller has that can be satisfied by using this leverage.

Here’s an example:

Odeta Kushi, Deputy Chief Economist at First American, recently identified a situation in which many sellers are finding themselves today:

“As mortgage rates are expected to remain near 3%, millennials continue to form households and more existing homeowners tap their equity for the purchase of a better home…Many homeowners may want to upgrade, but do not for fear that they will be unable to find a home to buy.”

She then offers a possible solution:

“While the fear of not being able to find something to buy will not disappear in a limited supply environment, new housing supply can incentivize existing homeowners to move.”

There’s no doubt many sellers would love to build a new home to perfectly fit their changing wants and needs. However, most builders require that they sell their house first. If the seller sells their home, where would they live while their new home is being constructed?

Going back to the concept of leverage:

As mentioned, buyers in the River Valley have compelling reasons to purchase a home now, and many homeowners have challenges to address if they want to sell. Perhaps they can make a deal to satisfy each party’s needs. But how?

The seller may decide to sell their home to the buyer at today’s price, which will enable the purchaser to take advantage of current mortgage rates. In return, the buyer might lease the house back to the seller for a pre-determined length of time while the seller’s new home is being built. A true win-win negotiation.

Not every buyer will agree to such a deal – but you only need one.

That’s just one example of how a seller might be able to overcome a challenge because of the leverage they have in today’s market. Maybe you feel a need to make certain repairs before selling. Perhaps you need time to get permits or approvals for certain upgrades you made to the house. Whatever the challenge, you may be able to work it out.

Bottom Line

If you’re considering selling your house now but worry a huge obstacle stands in your way, let’s connect. Maybe with the leverage you currently have, you can negotiate a deal that will allow you to make the move of your dreams. Either way, our team at Pillar + Post is here to walk with you every step of the way. 

Millennials: Is It Time to Buy a Bigger Home?

Millennials: Is It Time to Buy a Bigger Home?

In today’s housing market, all eyes are on millennials. Not only are millennials the largest generation, but they’re also currently between 25 and 40 years old. These are often considered prime homebuying years when many people begin to form their own households and invest in real estate. If you’re like many millennials who are spending much more time at home these days, you may have a growing need for more space or upgraded features, making moving more desirable than ever.

For those millennials who already own a home, there’s a great opportunity to move up in 2021. Danielle Hale, Chief Economist at realtor.comexplains:

“Older millennials will be trade-up buyers with many having owned their first homes long enough to see substantial equity gains.”

Even if you bought a home sometime in the last few years, you may have more equity than you realize, and that’s a big factor to consider when you’re thinking about moving. According to the Homeowner Equity Insights Report from CoreLogic:

“In the third quarter of 2020, the average homeowner gained approximately $17,000 in equity during the past year. This marks the largest average equity gain since the first quarter of 2014.”

Growing equity can be the driver you’re looking for to fund your next move, especially if what you need in a home is changing right now. As equity builds over time, it can be put toward the down payment on your next home. As families move into and around Fort Smith, Van Buren, Alma, Greenwood, and the surrounding areas, sellers are at a huge leverage to sell their home with great equity. 

In addition to equity gains, today’s housing market affordability is powered by record-low mortgage rates, so moving at a time when you can get more for your money may be more realistic than you think.

Bottom Line

If you’re a millennial thinking about moving this year, you’re not alone. Let’s connect to shed light on the equity you have in your current home and the opportunities it can create.

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