Homeownership Offers Stability & Wealth Creation

Homeownership Offers Stability & Wealth Creation

The most recent Housing Pulse Survey released by the National Association of Realtors revealed that the two major reasons Americans prefer owning their own home instead of renting are:

  1. They want the opportunity to build equity.
  2. They want a stable and safe environment.

Building Equity

In a recent article by The Mortgage Reports, they report that “buying and owning a home is the essence of ‘The American Dream.’ Each month, your housing payments go toward owning your home instead of renting it; building your personal wealth and assets instead of someone else’s.

History has shown that homeownership is a clear path to wealth-building, with homeowners boasting a net worth [that is] multiples higher than the net worth of renters.”  

Family Stability 

Does owning your home really create a more stable environment for your family?

survey of property managers conducted by rent.com disclosed two reasons tenants should feel less stable with their housing situation:

  • 68% of property managers predict that rental rates will continue to rise in the next year by an average of 8%.
  • 53% of property managers said that they were more likely to bring in a new tenant at a higher rate than to negotiate and renew a lease with a current tenant they already know.

We can see from these survey results that renting will provide anything but a stable environment in the near future.

Bottom Line

Homeowners enjoy a more stable environment, and at the same time are given the opportunity to build their family’s net worth.

Buyer Demand Is Outpacing the Supply of Homes for Sale

Buyer Demand Is Outpacing the Supply of Homes for Sale

The price of any item is determined by the supply of that item, as well as the market demand. The National Association of REALTORS (NAR) surveys “over 50,000 real estate practitioners about their expectations for home sales, prices and market conditions” for their monthly REALTORS Confidence Index.

Their latest edition sheds some light on the relationship between Seller Traffic (supply) and Buyer Traffic (demand).

Buyer Demand

The map below was created after asking the question: “How would you rate buyer traffic in your area?”

Buyer Demand Is Outpacing the Supply of Homes for Sale | MyKCM

The darker the blue, the stronger the demand for homes in that area. Only six states had a weak demand level.

Seller Supply

The Index also asked: “How would you rate seller traffic in your area?”

As you can see from the map below, the majority of the country has weak Seller Traffic, meaning there are far fewer homes on the market than what is needed to satisfy the buyers who are out looking for their dream homes.

Buyer Demand Is Outpacing the Supply of Homes for Sale | MyKCM

Bottom Line

Looking at the maps above, it is not hard to see why prices are appreciating in many areas of the country. Until the supply of homes for sale starts to meet the buyer demand, prices will continue to increase. If you are debating listing your home for sale, let’s get together to help you capitalize on the demand in the market now!

 

Maybe Someday….

Image result for someday quotes

Remember the first time you lived away from your parents? You likely lived in a small apartment or in a dorm room. It usually doesn’t take very long of writing rent checks to realize that you would like to own a home, someday.

Years go by and you still don’t have a down payment. Your credit still isn’t high enough.

But when the time is right, when the stars align, someday, you will buy a house.

You find a house that seems just right, in a great neighborhood, great price, it is perfect, but…  You still don’t have a down payment? 

That’s okay. The time just isn’t right for you. You just got to wait until the time is right.


Here is the problem. Time alone doesn’t make you more eligible for home ownership.

It does, however, take time to accomplish down payment and credit score goals. Don’t waist the following years waiting for it to happen on its own. Be proactive in your goals.

  1. Find out what you can afford. You can always buy cheaper but you must always stay in a comfortable range. Use this tool to help. http://acerealty.net/buying/affordability-calculator/
  2. Calculate 10% of your price point. For an example, if you figure you can afford a $100,000 house you should be making at least $2600/month. You should start to save $10,000 for a down payment.
  3. Make a Savings Plan. Set aside 10% of your paycheck a week before you pay your bills. You more than likely will find that you can live on 90% of your income just fine. Do you know how long it will take to save $10,000 at that rate of $260/month? 3 Years and 2 Months. If you can save more than that, great! The sooner you will be ready. Can’t save 10% a month? Then you need to be looking into cheaper priced houses.
    Your numbers will actually look very similar no matter what price range you are in. If you are buying a house that is within the affordability calculator suggestion, and save 10% of your monthly income, you should have enough in 3 years and 2 months for the down payment.
  4. Get your credit score up! Here are some suggestions right from FICO.
    http://www.myfico.com/crediteducation/improveyourscore.aspx

What is easy to do is also easy not to do — Jim Rohn


When you are ready for the next step of shopping for a house, contact me! I would love to help.

Angie Uttecht 605-350-2553

It’s Not an Investment

Scrolling through your news feed, you might have noticed a couple articles here or there that states “buying a home is not an investment” or that “home ownership is not part of the American Dream anymore”.

It is very good to broaden your thoughts and challenge what you know to be true. But lets look into the points that are made on these articles and think it through for someone considering buying in our market, Huron, SD.

Let me summarize these articles for you.

Investments make you money, not cost you money.

 

But isn’t it true that if you were to invest in the stock market, it would actually cost you money? Often when investing you would contribute monthly, even. What’s the difference?  You will not find an investment that doesn’t cost you money. The very definition of investment is “The action or process of investing money for profit or material result.”

After cost of maintenance you will end up paying more than renting.

 

This of course is different for every single house purchase. But if you buy a house in disrepair you can get a good deal on it!

Lets look at an actual situation that happened in Huron recently.

A landlord bought a house for $29,000. It looked really bad. The siding was falling off, it was dirty, had a bad central air unit, broken windows, etc. The landlord puts less than $4,000 into the house and 2 months later had tenants renting it for $650/month.

Hypothetically, the tenant could have bought the house and fixed it up. If they did that they would only have to pay $250 a month instead. That would have been a savings of $400 a month.  Now I’m sure the landlord will have to go in and fix things on occasion. $100 here, $200 there. Over 5 Years how much do you think the maintenance would cost? Over 24,000? Of course not! But that is the break even point.

If you over pay for a house that needs a lot of work, it is possibly a bad investment. But realistically, you will pay less for a house you own then a house you rent in the Huron Area.

Who wants to go to jail for 30 years? You can be mobile and nimble if you rent.

This is an actual statement pulled from an anti-home buying article. This is very misleading. Signing up for a 30-year mortgage in no way obligates you to stay in a house for 30 years. It is just a payment plan that guarantees your interest rate for 30-years, and if paid consistently every month, it will be the end of your mortgage.  That is a very long time, so please see attached inspirational quote by Earl Nightingale. If during this time your home needs change you can always sell and buy somewhere else.

Image result for time will pass anyway quote

 

 

 

The American Dream

Have you thought much about your goals and dreams lately? Where would you like to be in 5 years?  Take a moment and actually think about that.

Would you be happy if you were in the same exact spot, but 5 years older? If not, what would you like to see change? Would you like a better job? Would you like a better home?

Why not strive for it? We live in a great country. And if you work hard, are determined, and have initiative you can achieve anything. That is the American Dream.

No matter what that dream is, whether it is home-ownership, having a successful business, or retiring in Florida, you can start your path there today.

Here are a couple reasons Home-ownership is part of the American Dream, and it can be part of your dream too.

  • It doesn’t matter how old you are. As long as you are an adult, finances permitting, you can buy a house.
  • Financing makes home-ownership more realistic for the common person.
  • You cannot be kicked out of a house you own, as long as you make the payments you will have stability.
  • Owning a home is like a savings plan. You will build equity over the years, to cash out of or to pass on as an inheritance.
  • You make your rules. You can have pets, or not. Paint your room whatever color you like, change whatever you want, and play the drums as loud as you can.
  • Rent prices will likely rise but your fixed mortgage will not.
  • Someday the house will be paid in full. No more mortgage!

Here are a couple steps to get going in the right direction.

  1. Start Saving – You will need a down-payment. If you don’t have any extra monthly income to save, cut back on what’s unnecessary. Stop buying things, and start selling things. Get rid of cable. Drive around an older, cheaper car. Be creative and you will find some money to tuck away.
  2. Build your Credit – Keeping a Credit Card paid off, and having a contract cell phone will help build credit if you have none. But don’t fall trap and get into debt. That will hurt your chances of qualifying for a loan.
  3. Build Relationships – It’s never too early to start talking with a loan officer and a real estate agent about your goals. Building good relationships with these people can benefit you greatly. A loan officer can give you more specifics on what you need to qualify and can alert you to lower interest rates or changes in loaning guidelines that will affect you, while a Realtor will be able to alert you to a particularly good deal that comes on the market.

If you would like to start the conversation of home-ownership with a Realtor, feel free to contact me. Angie Uttecht 605-350-2553

But is it really a good investment?

On the internet you can find every type of article. Why eggs are good for you and why they are bad for you. Evidence taken from the same studies but with different points of view. This is true about every topic imaginable. What about real estate? Is real estate really a good investment and why do so many people choose to never buy a house?

What you will find is a lot of people who are in a city telling you that real estate isn’t what it’s cooked up to be. They will tell you that it is actually cheaper to rent and that the equity you build is nothing compared to being able to skip town on a drop of a dime.

And in many areas of the country they are right. San Francisco for example has average rent of a 2BR at $4126/month where the average 2BR home value is 1.2Million. That is a mortgage payment of roughly $8,000/month including property taxes. So buying in San Francisco was a good investment in the past but being a new home owner will cost you almost twice as much as renting.

How about in Huron, South Dakota? Is it really a good investment?

Here are the numbers: Rent for a 2BR is around $600. You can buy a investment quality 2BR home for around $45,000. The mortgage, plus property taxes for that is around $330.  But you wouldn’t buy a investment quality home. You could afford  $82,000 home for the same monthly payment of $600/month.

Houses in that price range have a lot more going for them. Many have 3+ bedrooms and garages.

So, even though it is true that in many parts of the county buying a house isn’t worth it, that isn’t the case for Huron. You will be living with a lot more for your money AND build equity.

Where does SD rank for best retirement state? You’ll be surprised!

It ranks #5! 

According to kiplinger.com our beloved South Dakota is ranked in the top for retirement friendly states. Their reasons are as follows:

  1. There is no state income tax so Social Security benefits and other retirement income are not taxed.
  2. Cost of living is low.
  3. Percentage of the population over 65 is above the national average with 14.5%
  4. Sales tax is relatively low.
  5. SD offers many home-owner benefits for Seniors including tax freezes, property tax reduction, and property tax homestead exemptions. Property Tax homestead exemption is for homeowners 70 or order or a surviving spouse. This allows them to delay paying property payment until the sale of the property.
  6. There are no inheritance and estate taxes.

The only states that rank better than SD for retirement are Delaware, Florida, West Virginia and Pennsylvania.

Our neighbors, Nebraska and Minnesota, are among the worst states for retirees along with North Carolina, New York, New Mexico, California, & District of Columbia.

So why not move all your older relatives to the wonderful state of South Dakota!

Click here to see the full report and how every state ranks.

2 things you need to know about your loan

During a home purchase it might feel like you are being guided a little too well and aren’t making any decisions for yourself.

You have options! At least, you probably have options. A loan officer might just sign you up for a 30-year fixed loan without asking you if that is what you wanted. There is nothing wrong with 30-year loans. But understanding and deciding for yourself is a good idea. Knowledge is power.

Understanding the difference between 30-yr and 15-year mortgages.

30-Year Mortgage Pros: 

  • Lower Payment! Stretching the payments over this amount of time will result in significantly lower payments every month. You can expect to save $220/month on a $100k loan.
  • More buying power. A $244k house with a 30 year mortgage has very similar monthly payment to a $167k house with a 15-year mortgage.

15-Year Mortgage Pros:

  • Lower Interest Rate. 15 year mortgages have significantly lower interest rates than 30-year mortgages. If a 30-year rate is at 4.12%, you can expect a 15-year to be at 3.36%. That means less money is going towards interest and more towards paying off the house.
  • Quicker equity growth. The higher payment and lower interest rate goes to good use and pays off your house 15 years earlier!

Understanding the difference between fixed rate loans and balloons.

Fixed-rate: Your balance will be paid by the end of the term. That is the way they are constructed. If you have a 15 or 30-year fixed mortgage you can keep that loan, at that interest rate, until the entirety of your loan is paid.

Balloon Mortgages: Balloon mortgages require your balance to be paid in full at the end of a short term. Typically 5-years. If you don’t have the money to pay it off, you will need to refinance. The risk here is that there is no guarantee interest rates will be reasonable in 5 years.

If you are only offered a Balloon Mortgage, shop around! There might be another bank that will loan to you on a fixed-rate!

Ready or Not? When to consider buying a home.

Let’s be honest. Buying a house is NOT for everyone. There are a great number of people who shouldn’t be buying a house right now. It is imperative to know not only if you can, but if you should be purchasing a home.

Many people have home-ownership goals, and that is fantastic! But yet home-ownership doesn’t fit well with their current lifestyle.

Example 1: If you are a college student in a large city somewhere, you can only find a place to rent for $1100/month. But if you were to buy a condo your payment would only be $750 a month. This is understandably tempting, but if you only plan to live in that area for another 2-3 years before you sell it, you won’t be able to re-coop the closing and Realtor costs. This situation will more than likely just add expenses and headache. Someone in this situation probably shouldn’t be buying right now.

Example 2: You are single, have college debt, work for minimum wage, live with your parents, and have no savings. You would like to start feeling more like an adult and move out of the house but there isn’t a lot of affordable rentals. You find that you could purchase a small home for a monthly payment of $400. If you can get the financing, can afford the payments and plan to live in the area for a while, it isn’t the WORST idea. But first consider the possibility of staying with your parents longer and paying off the student debt. It will also allow you to be more mobile if a job that uses your degree is available in another town.

Example 3: You are planning on staying in the town for the foreseeable future, you live paycheck to paycheck paying $700/mo rent. You find a $40,000 house that fits your needs and you are pre-approved at the bank. The payment on this house will be around $300/mo so you should have plenty to spend on repairs and updates. Maybe even grow a healthy savings and upgrade to a bigger, nicer house someday.

Example 4: You have a steady well-paying job, good credit, and some savings. You know you want to live in the area for quite some time. And home-ownership is on your mind? Go for it!!

Home-ownership can be a wonderful, helpful, and important life changing decision. It can even be the key to financial stability. But only if it is done responsibly during the right time in your life. Otherwise, sadly, home-ownership can be burdensome, risky and end in foreclosure.


 

If you want to pursue home-ownership, please contact me. Angie Uttecht 605-350-2553 angie@soldbyangie.com

 

 

Fixer Uppers — Is it a Good Deal or a Money Pit?

If you have been browsing through houses online and you found an under priced house that is a fixer-upper, you might have found a bargain! The other reality is that it could be a money pit.

Here are some questions to figure out before making an offer:

  1. Is it just ugly? or does it have bigger problems?  Old carpet, cat urine smell, ripping wallpaper, chipping paint, no problem! Not to say that it will be cheap to replace carpet and paint but it is a cost that you can easily calculate and decide if it is worth it. You can get a really good deal on a nice house if you are willing to use some elbow grease.
    Leaking roof, missing siding, broken furnace, missing plumbing? Now this is a problem. This is not a property to jump on. Take your time. You will need to get estimates to fix each of the issues. And plan for it being twice as expensive. If you believe its still worth it, then go for it. But don’t expect to be able to move in quickly!
  2. Always stay in your comfort zone. This isn’t usual advice but when it involves this much risk you need to know what you can handle. If you aren’t comfortable with a deal it is likely that you aren’t understanding everything that it will involve. And a miscalculation can be very very spendy!
  3. Have the money to spend. Make sure that you have your finances in order. If you can barely make the down payment, how will you afford the repairs? If you can’t move in until the repairs are done, you will be paying insurance, utilities, and interest on a property that you aren’t living in. If you are going to be taking a risk, make sure you can handle your worst case scenarios.
  4. Have a backup plan. In the worst of cases what will you do? Your Plan-B doesn’t have to be spectacular, make you money, or be convenient; but you should have one! Can you easily resell the property as-is for what you paid? Can you live in the house before repairs are made? Just as long as your plan isn’t to skip town and let the home be foreclosed on!

    If you need my assistance please don’t hesitate to call, Angie Uttecht 605-350-2553