The American dream of homeownership is a very feasible aspiration for 2012.
There are many benefits of owning a home. Yet some first-time buyers are skeptical of purchasing with the uncertainty surrounding the housing market.
The uncertainty many reference when speaking about the housing market involves a specific date when home values will increase. Since no one can pinpoint this date, the word uncertainty (when paired with the housing market) often reveals a negative connotation.
There are some factors we can be certain about in this housing market such as home values rebounding. This is true; the housing market often moves in cycles.
It’s safe to assume that many Americans harbored the same uncertainty during the George H. W. Bush administration in the early 1990s when the national homeownership rate fell from its previous historic high of 64.4 percent in 1980 to a low of 64.1 percent in 1991.
In the 1960s Lyndon Johnson illustrated a correlation between homeownership and accountability by stating “owning a home can increase responsibility and stake out a man’s place in his community…The man who owns a home has something to be proud of and reason to protect and preserve it.”
This statement is still true more than 50 years later. There are many reasons to take pride in homeownership such as:
- Appreciation – Buying a home now (at the current rates) can almost ensure your home’s appreciation in the future. Mortgage rates are near historic lows and home prices in many parts of the country are down. This is the perfect recipe for home appreciation. Additionally, many foreclosed homes are available for a fraction of the original cost. This can translate to a higher profit if you decide to sell once the market rebounds.
- Property Tax Deductions – For income tax purposes, real estate property taxes for a vacation home and first home are fully deductible. The IRS (Publication 530) provides detailed tax information for first-time buyers that may answer many questions about what deductions homeowners are eligible for.
- Preferential Tax Treatment – If you own your home for more than a year and receive more profit than the allowable exclusion after the sale of your home, the profit will be considered a capital asset. Capital assets are given preferential tax treatment.
- Equity Building – Many factors such as credit qualification, loan flexibility, and annual percentage rate (APR) contribute to the final decision of what type of mortgage loan best fits your goals. Yet, a new trend being used by some homeowners is to actually add money to their monthly payment to decrease the principal balance of their loans at a much faster pace. This trend is called equity building. Equity builders usually select a home loan with a lower interest rate (and a shorter term loan such as a 15-year fixed) to help build equity faster. This rapid payment process allows borrowers to:
- Pay off the principal balance faster
- Lock in near-record-low interest rates
- Shorten the length of their home loan
- Own their home faster
- Pay substantially less mortgage interest
Equity building is a beneficial trend that’s becoming more and more popular with fiscally responsible homeowners. Also, home equity is the largest single source of household wealth for most Americans.
- Pride – Homeownership offers many benefits to many different types of people. For some homeowners, playing your music as loud as you want and painting the walls the color of your choice is a perk. For me, homeownership will permit me to build an NBA regulation size basketball court on my own property. For my coworker Joel Jarvi, home ownership may allow him to build the indoor slide of his dreams. No matter who you are, homeownership is a purchase, commitment, and journey that’s sure to bring you pride.
Furthermore, when the uncertainty surrounding the housing market fades and the market rebounds, homeownership may in fact transform that pride to profit through a home sale.
Jonathan Slappey is a writer for Quicken Loans, a company whose clients believe it’s Engineered to Amaze. Interested in being Amazed by us? Read trusted reviews at our review site.
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Agree with your points— Appreciation is huge! – agree buying a home now—can “almost ensure your home’s appreciation in the future.” This is true for my area.
Excellent rundown on reasons to buy a home. Enjoyed reading this post.
Nice article and capitalized well the points we’ve all been suggesting to buyers and especially the tire kickers. I’ve often put the timing issue into simpler terms…if Anyone knew they were going to get cancer and when, they’d have had different priorities. Who wouldn’t? Truth is people look to often for guarantees and protection from risk but wanting all the rewards. Your article will help!
Great Points! This article is a definite read for prospective buyers. Captures the top reasons why to buy in today’s market.
Great article. Must read
…“almost ensure your home’s appreciation in the future”… There is no correlation whatsoever. If rates were this low in 2006 and you bought in most areas of the country, you would still be on the wrong side of the trade / under water / however you would like to phrase it. Silly. I understand that realtors want to sell homes, and mortgage companies want to originate loans, but it appears that rates will remain low for the next year or two at a minimum, and banks inventories of homes is still very high. So? So there is so much supply that prices are going to have a very hard time creeping up regardless of rates. Just because your mortgage costs you less, doesn’t mean your home will appreciate or that there is less risk in real estate as an investment.
The Author makes some very valid points. HOWEVER, realize that the author works for one of the largest independent mortgage originators in the country. His job is to convince you to purchase a home and hopefully direct mortgage orgination business to his company. He is also fails to realize that his statement ” Also, home equity is the largest single source of household wealth for most Americans.” is one of the main contributing factors as to why the state of our economy is what it is today. HOME EQUITY DOES NOT MAKE YOU WEALTHY!!! Don’t believe me, Google the topic and educate yourself.
The % loss of equity since the fallout, sadly, will never be recouped in the ownership life-time of U.S homeowners 35-40 years of age or older. Increased foreclosure inventory and shadow-foreclsoure inventory remain huge and the problem is worse than anyone wants to let on…and I’m in the business!
Nice propaganda article. I will rebutt later, on mobile today
I am a bit taken aback as to the somewhat irresponsibility of the article and blatant
highlighted ‘sales pitch’ to potential buyers from realtors and lenders.
Reason number one.
1.Appreciation
If this is the number one or in the top 5 reasons to buy a home, then history has taught the masses nothing. Pinning ownership on appreciation is a clear lack of financial knowledge.
Thinking of a house in terms of an ‘investment grade asset’ has lead the market to ruin in
the past 10 years.
Speculation has no place in the residential market. If appreciation is a primary goal to
ownership, then a potential buyer best stay a renter. Is appreciation a viable ancillary benefit? Yes. But certainly NOT a primary one.
4. Equity Building
Again what has recent history taught the bots? Obviously not very much indeed.
If building equity is a top five or primary reason for ownership…
a potential buyer has their priorities wrong.
The use of the phrase ‘credit qualification’ is code for secondary loan, please
don’t try and pass this off anything else. The equity potential is another good ancillary
benefit, but not one that should be at the top of the list.
‘Hawking’ this as a primary benefit sets up potential owners for fiscal irresponsibility.
You can argue until your blue in the face about it, but if equity accumulates at a fair pace,
most people will be inclined to ‘cash-in’ on said equity. Your premise seems to take into account
a sound, logical and thoughtful home owner that has fiscal restraint. Well, we all know that is simply not true for the majority of home owners.
With interest rates at below 4% and some loans in the upper 3% range, there is NO need
to be refinancing anytime soon. Rates will remain low for the near and mid-term.
The Fed is not going to raise rates with the fear of inflation. And although the Fed does not ‘set’ mortgage rates, the Fed Funds have a correlation and an influence. Treasuries won’t be rising
anytime soon either. So this ‘argument’ is about as useful as an ashtray on a motorbike.
The potential or possibility of using one’s home as an ATM (along with the previous unregulated speculative buying) has resulted in the second worst housing depression in our history- perhaps some of you have forgotten that.
Subversively or sublimely suggesting that a home owner could build equity to possibly ‘borrow’ against the value or probable appreciated value is not only irresponsible, but completely reckless from a lenders position.
Sadly, it reveals how little the banking industry truly cares about the average consumer.
More and more average consumers are falling into poverty and just above poverty.
43 million are food stamps, with nearly 50 million in total receiving some kind of assistance.
The buying pool is much, much smaller than anyone in the industry realizes or will admit to.
This IS the new reality for the next decade- at least.
The take-away, or at least the jest and ‘perception’ of the article and similar articles and discussions about real estate from the industry itself is that all lenders and realtors are concerned with, is making money, damn the consequences and accountability.
It is clear that the bottom-line is the ‘sale’ is the only thing that (continues) to matter in the business of real estate, instead of promoting responsible ownership within the means of a conservative to reasonable D-T-I ratio and an asset and a loan offering true affordability.
Risk aversion with regard to defaulting is something the industry wants to disregard,
yet again.
Wishing the market or writing articles based on a sort of ‘hopium’ will not get it back on track.
It is clear that most re persons do not have a broader understanding of the macro economics that directly affect the micro markets and conditions which are keeping the markets depressed.
First and foremost the labor market has to improve and not improve with false headlines and
deceptive data from the BLS/news outlets/bankers/politicians and real estate persons.
The TRUE U3 rate stands at over 11%. The real U6 rate is over 22%. The mean duration of Long-term UE is 41 weeks AND 43% of all unemployed persons are in the long-term bracket.
These two metrics alone indicate a labor market that is in decline, not on the upswing.
With seriously diminished purchasing power and the ability to secure a manageable mortgage loan, inventory is going no where. Add to the mix, a massive amount of shadow and distressed properties (both disclosed and undisclosed) and it plainly obvious that market conditions are
not going to improve. No matter how much you wish or want or push for it to be so.
The industry is its own worst enemy-. failing to see and understand the underlying reasons
for the housing depression and why it is not improving. Stop reading propaganda from the useless nar and nhba. Stop buying into the political arguing as to why the economy is back-sliding.
(despite all the efforts of the media and politicians and certain financial sectors to say otherwise)
The economy is NOT growing. A GDP of 1.8% is negligible. Retail Sales are in the dumpster.
Big name retailers are going under. Sears/Kmart, Best Buy, and more to come this year.
Commodity inflation is up approximately 30% from 2010 (food & fuel combined)
The consumer has little to no discretionary income, therefore no improvement in the
economy and certainly not in the housing market. It is hardly rocket science, it is just common sense and mathematics. Something that is apparently lost on a lot of agents in the business.
Perhaps prefacing articles with, ‘if you have a sufficient DP (perhaps a min of 15%) if you have enough savings to fall back on, if you have a a job and a stable employment history, if you stay within the confines of a reasonable D-T-I (say in the range of 25%-28%) then yes, there ARE some good reasons to buy a home.
But simply ‘pushing’ people to buy homes because you may need a commission,
could be and often is viewed as immoral and irresponsible. Something the industry fails to grasp.
The industry has to re-think itself in terms of viability. Markets are not going to return to
the ‘good old days’ at least for the next decade or even longer.
I’d like to further re-iterate or stress, that there seems to be a widely held perception
within the industry that there are a fair or large amount of buyers
‘waiting in the wings’ with a surplus of cash or DP or sufficient income levels
that are not buying because of mass hysteria and overblown media reports.
Let me say this to you and others;
Simply laying out a strategy to bypass or ‘mask’ the serious symptoms of the housing
market will not cure or fix the very serious problems it is facing. Treating the disease
so to speak, is the only way to ensure a recovery- which is far down the road.
(I recommend breaking out your binoculars…) Because there is no real recovery in sight.
The problems are complex and deep in both the general macro and market- specific micro economies.
Another point I wanted to address previously was your mis-leading comment of:
“It’s safe to assume that many Americans harbored the same uncertainty during the George H. W. Bush administration in the early 1990s when the national homeownership rate fell from its previous historic high of 64.4 percent in 1980 to a low of 64.1 percent in 1991.”
The MAJOR difference was that during that period, 1990-1995 the Unemployment rate
was at a mean of 6.41% ranging from a low of 5.6% to a high of 7.5%.
This IS a huge factor that you apparently left out of the analysis.
A delta of approximately +/- 3% over the time periods. And while 3% doesn’t sound
like a big deal, in the context of unemployment it represents a very large number.
Sure, the market cycles and fluctuates, ALL markets exhibit the same cyclical characteristics.
This is a great article. While some still seem to dispute this article, which is better? Continuing to pay rent and feed the pocket of landlords? The current rental rates in Chicago far exceed the mortgage payment on a home, at today’s pricing in many areas. This makes it the best time in our lifetime to buy a home. It is highly unlikely that home prices will drop another 30% – 50% so this is a risk worth taking. Anyone in real estate, mortgage lending or not, can figure this out. It just makes sense.
I believe that now is a good time to buy a house.
But not for the reasons given. People in the real estate business all have the same idea, and that is “Now is always a good time to buy” because their profits depend on sales. The idea that residential real estate appreciates is a post World War 2 phenomenon, created by the massive intrusion in the residential real estate market by the federal government. And as this article states 2 of the other 5 reasons to buy a house are Tax Deductions and Preferential Tax Treatment both federal programs that provide special treatment for home buyers. If the federal government were to end these programs that would be the end of residential real estate sales. People have to stop thinking about their homes as an investment. One final word, Equity Building, isn’t a reason to buy a home but a financial strategy, that assumes that best place to invest money is your home. It may be so in the future, but if the recent market teaches us anything it is that real estate prices can go down as easily as they can up.
Another point I wanted to address previously was your somewhat mis-leading remark of:
“It’s safe to assume that many Americans harbored the same uncertainty during the
George H. W. Bush administration in the early 1990s when the national homeownership rate
fell from its previous historic high of 64.4 percent in 1980 to a low of 64.1 percent in 1991.”
It’s not the same uncertainty at all. The MAJOR difference was that during that period,
from 1990-1995 the Unemployment rate was at a mean of 6.41% ranging from a low of
5.6% to a high of 7.5%.The buying public had much more Discretionary income than today.
The record high unemployment IS a huge factor that you apparently left out of the analysis.
A delta of approximately +/- 3% over the time periods. And while 3% doesn’t sound
like a big deal, in the context of unemployment it represents a very large number.
Sure, the market cycles and fluctuates, ALL markets exhibit the same cyclical characteristics. There is no comparing what has been basically a very deep recessionary/depressed economy for 3+ years to any previous recessions and markets in modern-history, except perhaps the Great Depression.
I bought my house in 1991, It was somewhat of a handyman special. I paid $69,000 for it. I am a frugal type of person and did not have a credit card with large balance to pay off, fixed the house when I had extra money. Paid down principal whenever I could instead of buying new car or new gadget etc. and finally made last payment about a year ago. House is worth about two hundred thousand dollars now, I have enjoyed the privilege of not having a landlord and enjoying the privacy home owning affords, it has helped me to be ablle to write off the mortgage interest on my taxes. I am very proud of the fact that I have made a silk purse out of a sows ear and contributed to my neighborhood looking better. It is a two family with small sq footage on each side and my daughter lived in part of it. Now she has moved out and gotten married and I will start to rent it out and derive a decent income from it. It was the best thing I have ever done for a myriad of reasons. It provided a haven for my family and myself, it is shelter for me, I enjoy my land, I made the garage,( which I never parked my car in and only stored “stuff” in) into a lovely screened in porch and enjoy that immensly. I have family and friends over to enjoy it with me. It is a source of pride for me as many have stopped to admire the way it looks now and I feel good about how I have contributed to my neighborhood.
It seems odd to me that people are putting fear to future homebuyers by saying that they could depreciate or won’t appreciate like they were for a while.
Owning a nice home should at least be as important as owning a nice car, most people seem to have no problem paying for a new car that depreciates the minute you drive it off the lot. paying usually between 25 K to 50K for a vehicle seems to be something people do about every year to 6 years and they hardly ever get what they paid much less more than they paid.
A home is something they can live in forever with regular maintenance and some upgrades if they buy the home at the current appraised value it will usually at least still be worth that price in 5 years and if they keep it 10 or 20 years will more than likely be worth a lot more. Plus they can claim the interest paid and can as you say not be paying someone else that invested in a place rental payments which they will never recoup.
I know people that paid the adjustable rates some were encouraged to get prior to house prices dropping are hurting but with rates at an all time low and house prices that have dropped I think they can feel comfortable that it makes sense most of the time to go on and purchase a piece of that american dream. I would say the only ones that might want to rent are those that know they will be moving in a year or two or those that have to pay above 6 percent due to credit problems, and no I don’t think you should get an adjustable interest rate………no matter what the loan officer tells you.
Thanks for considering buying a used car and using some of that money as downpayment or closing cost on a home purchase, that way your negotiating power will be better than when you have to ask the seller to pay all of your closing and give you a great price too.
Yes, you can own a great home.
Karen Waitzman Realtor, Birmingham Alabama
Those are all good reasons however, what about the market disruption from big banks and the fed’s artificially low interest rates? There are many instances where banks are holding off inventory to keep prices high. In addition, the toxic mortgages are still in the fed’s books and have not been cleared off yet…
Excellent. Thanks.
I’m lucky to be selling Real Estate in Burlington, VT where the market is doing really well compared to many areas. Our firm of 60 agents is up 29% in sales year to date compared to this time last year. I much agree people need to buy smart today and “take pride in home ownership”.
No worries for home buyers today. It’s time to buy a new house because based on the surveys and news, prices are down low as well as the interest rates are at it’s lowest.
Owning your own home is definitely a strong anchor for your life. Yet, I am very particular of mortgage rates since I’m on a budget. Any idea of the best mortgage rate deal?
Hi Carol, we’d be happy to take a look at your situation to see what we can offer you, I can have one of our home loan experts contact you to see if we can be of assistance. Thanks.
nice reasons. thanks for sharing.
Great reasons to buy a home in 2012 , I can say last two months left grab the opportunity.
Can’t disagree with any of these reasons!
I am 25, and buying a house is now entering the sphere of my life. When will it happen? Will it happen soon?
Not too soon for me, but it is coming up. It is just so tricky. More than almost any other decision in life, buying a home is impacted by every other decision you are making in your life – and future decisions or actions you want to take as well.
Putting all that together and finding an answer is… well.. just… HARD.
We’re in the process of buying a house and everything seems to be going smoothly. We are renting at the moment and our landlord has says we can leave before our contract is up (June) as long as we give two months’ notice. But we are wary of giving so much notice as we have tried to buy a house before and it has fallen through just before the completion date. If we give notice and then for some reason, don’t end up buying the house, we’ll be homeless! Any suggestions or do we just take the risk?
Thanks for writing! To help answer your question, we’ve reached out to our experts in this field at In-House Realty who should have some suggestions for you shortly.