The U.S. homeownership rate may have finally bottomed out, as the share of Americans who own homes is steadily climbing. The ownership rate posted an increase in the second quarter, reversing a sharp downward trend that begun in the Great Recession.
The homeownership rate was 63.7 percent in the second quarter, the U.S. Census Bureau reported. That marks nearly a full percentage point increase from a year ago. Last year, the homeownership rate had plunged to a 50-year low of 62.9 percent.
“The addition of 1.2 million households being homeowners is clearly good news, as more households are participating in housing equity gains,” says Lawrence Yun, chief economist for the National Association of REALTORS®. “But let’s keep it in perspective: There are fewer homeowners today compared to a decade ago, while renter households have risen by 8 million.
So it is still the case that the massive $7 trillion in housing wealth gains from the cyclical low point has been accumulated by a fewer number of families in America. Further advances in homeownership are required to strengthen and broaden the middle class.”
It’s easy to be confused by all the different finance and money terms out there. Here are a few terms common to real estate:
Escrow is a safe, intermediary account for money when it’s moving between a buyer and seller. Placing funds there tells the seller: “I’m serious about this deal and I can pay.” During the time the down-payment is in escrow, a homebuyer can take care of due diligence, including a home inspection. If it turns out something is off about the house — like structural damage — the buyer can pull out.
You can also escrow money (yes, it’s a noun or verb) for fees beyond your mortgage, like property tax and mortgage and homeowners insurance. Federal Housing Administration-insured mortgages, for example, require escrow accounts. (“Money terms you’re too embarrassed to ask about.” Bahney, Anna. CNN Money. http://money.cnn.com/2017/07/11/pf/money-terms/index.html?iid=SF_River.)
Even if you already know that APR means “annual percentage rate,” you might not understand what it is. Lenders are required to disclose the APR when lending, which is great for transparency…
The APR is the rate charged annually for borrowing money. But unlike an interest rate, it includes fees and other costs the transaction may include. So the APR is usually higher than the nominal interest rate. Also, unlike annual percentage yield (APY), the APR doesn’t take into account compounding interest. (“Money terms you’re too embarrassed to ask about.” Bahney, Anna. CNN Money. http://money.cnn.com/2017/07/11/pf/money-terms/index.html?iid=SF_River.)
Falling inventory forces homebuyers to move at fastest pace ever
Source: Housing Wire
Housing inventory fell 8.9 percent from last year in the second quarter of 2017, sending homebuyers scurrying to beat the rising competition.
Housing inventory dropped for nine consecutive quarters, and is currently down a full 20 percent from inventory levels five years ago, a new report from Trulia shows.
And now, homebuyers are snatching up homes at the fastest pace since Trulia began tracking in 2012. While 57 percent of homes were still on the market after two months in 2012, today that number shrank down to 47 percent.
Competition is so fierce, in fact, that 33 percent of Americans who bought a home in the last year made an offer without even seeing the home in person, according to a survey from Redfin, an online real estate brokerage.
This is up from 19 percent of buyers who placed an offer on a home without seeing it first last year. Among millennials, even more placed offers without seeing the home in person — a full 41 percent.
Millennials are saving for financial freedom—not retirement
Source: Yahoo Finance
Photo from Pictures of Money
Millennials often get a bad rap when it comes to financial responsibility. But it turns out those stereotypes may be off base. Millennials are saving more money than any other generation, according to a new study by Bank of America and Merrill Edge. But it’s what they’re saving for that really sets them apart from older generations.
Saving for financial freedom is the No. 1 priority for millennials — 63 percent of millennials said they’re saving a set amount of money to enjoy their desired lifestyle. This is a stark contrast to older generations: the majority of the Gen X and baby boomer generations prioritize their savings specifically to leave the workforce and retire.
This shift speaks to the bigger differences in the ways millennials and older generations view money, and what they prioritize in their lives. While it may not sound surprising that younger workers aren’t thinking about nest eggs as much as older generations, what’s a little different here is that they’re not thinking about retirement as a phase of life, let alone working to afford it. Millennials listed personal milestones as their top priorities: getting their dream job and traveling the world trumped more traditional goals like getting married and having children.
Even if you have the financial means to put in an all-cash offer, you may not want to do so.
All-cash offers can be more appealing to home-sellers, but you also need to take into consideration the other aspects of paying so much cash upfront.
Will you have enough liquidity left? At least a few thousand dollars left in your pocket is ideal. You may have repairs, upgrades you desire to make, and increased utility and maintenance costs for your new house — not to mention your typical costs and unexpected financial needs (such as medical bills or suddenly losing employment).
What if you easily qualify for a mortgage? Interest rates are still on the low-side, and by obtaining a mortgage to purchase a house, you would be able to keep a large chunk of your finances.
Paying all-cash means you miss out on a tax break. When you have a mortgage, you are able to receive a tax break on the interest paid to the mortgage lender.