What the Current Market Means to Today’s Consumers

NAR recently revealed two reasons Americans prefer homeownership:

• The opportunity to build equity.
• A stable and safe environment.

Homeownership becomes a part of your wealth-building strategy. Rental rates will rise in the next year by an average of 8% a new tenant is more desirable at a higher renewing a lease with a current tenant may become the trend.

How Have Recent Current Events Affected Our Markets?

Many economists have pointed to Brexit (Britain’s Exit from the European Union) as a reason that interest rates will remain low for the next few months. However, Trulia’s Chief Economist Ralph McLaughlin warns that this will not always be the case in a recent post:

“While the departure of the UK from the European Union has driven down the 10-year bond, and thus mortgage rates, we expect them to rebound later in the year as uncertainty over the economic consequences of the departure lifts.”

The Mortgage Bankers Association (MBA), the National Association of Realtors (NAR) and Freddie Mac all project that mortgage interest rates will increase by close to a full percentage point over the next twelve months.

According to CoreLogic’s most recent Home Price Index Report, home prices will appreciate by 5.3% over the next 12 months.

The Federal Reserve recently reported that a homeowner’s net worth is 36 times greater than that of a renter ($194,500 vs. $5,400).

In a Forbes article, the National Association of Realtors’ (NAR) Chief Economist Lawrence Yun predicts that in 2016 the net worth gap will widen even further to 45 times greater.

Homeownership is a form of ‘forced savings.’ Every time you pay your mortgage, you are contributing to your net worth. Every time you pay your rent, you are contributing to your landlord’s net worth.

What about Baby Boomers?

The myth exists that retirees (empty nesters) will instantly desire a smaller home. However, many decide to actually upsize to a larger home or invest in a second home.

With families scattered all over the world, empty nester parents long for all their children to be in a desirable destination with extra space for large family vacations, reunions, extended visits, or to allow other family members to move in with them – aging parents or boomerang kids.

According to Merrill Lynch:

4.2 million Retirees moved into a new home last year and two-thirds of retirees say that they are likely to move at least once during retirement.

“Retirees often find their homes become places for family to come together and reconnect, particularly during holidays or summer vacations.”

Whether you are a renter on the fence or an existing homeowner, the Real Estate marketplace has changed.  You may need to survey your bank and other lending institutions regarding:

What is the minimum down payment required to purchase a new home, a second home or an investment property?

What is the minimum FICO score required to qualify for a mortgage?

What Debt-to-Income ratio is allowed?

If you thought homeownership or a second home was out of reach, contact me so that I may answer all your questions. Real Estate is still one of the safest vehicles to grow your wealth.