Last week, CNBC ran an article quoting self-made millionaire David Bach explaining that not purchasing a home is "the single biggest mistake millennials are making" because buying real estate is "an escalator to wealth.”
Bach went on to explain:
"If millennials don't buy a home, their chances of actually having any wealth in this country are little to none. The average homeowner to this day is 38 times wealthier than a renter."
In his bestselling book, “The Automatic Millionaire,” Bach does the math:
Every three years, the Federal Reserve conducts a Survey of Consumer Finances in which they collect data across all economic and social groups. The latest survey, which includes data from 2010-2013, reports 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 by the end of 2016, the net worth gap will widen even further to 45 times greater.
You may have heard that the Federal Reserve raised rates last week… But what does that mean if you are looking to buy a home in the near future?
Many in the housing industry have predicted that the Federal Open Market Committee (FOMC), the policy-making arm of the Federal Reserve, would vote to raise the federal fund's target rate at their December meeting. For only the second time in a decade, this is exactly what happened.
There were many factors that contributed to the 0.25 point increase (from 0.50 to 0.75), but many are pointing to the latest jobs report and low unemployment rate (4.6%) as the main reason.
There are some renters who have not yet purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent free, you are paying a mortgage - either yours or your landlord’s.
As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to build equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.
Every homeowner wants to make sure they get the best price when selling their home. But how do you guarantee that you receive maximum value for your house? Here are two keys to ensuring you get the highest price possible.
1. Price it a LITTLE LOW
This may seem counterintuitive. However, let’s look at this concept for a moment. Many homeowners think that pricing their home a little OVER market value will leave them room for negotiation. In actuality, this just dramatically lessens the demand for your house (see chart below).
The price of any item (including residential real estate) is determined by ‘supply and demand’. If many people are looking to buy an item and the supply of that item is limited, the price of that item increases.
According to the National Association of Realtors (NAR), the supply of homes for sale dramatically increases every spring. As an example, here is what happened to housing inventory at the beginning of 2016: