Most Americans agree that home ownership is still a great investment

Americans: Home Ownership Still a Great Investment

Seventy-five percent of Americans say that “owning a home is the best long-term investment they can make and is worth the risk of ups and downs in the housing market,” according to a new survey of 2,000 bipartisan voters by the National Association of Home Builders.

Despite their situation — whether underwater on their home or even renters — the survey found Americans to be optimistic about home ownership. Eighty-one percent of those who own their homes outright, 76 percent with mortgages, 67 percent of renters, and 65 percent who have underwater mortgages cited home ownership as the “best long-term investment.”

When survey respondents were asked whether they’d recommend buying a home to a friend or family member just starting out, 80 percent of Americans said “yes.” Even home owners currently underwater — those who owe more on their mortgage than their home is currently worth — overwhelmingly (78 percent) said they would recommend home ownership to family or friends starting out.

More buyers are coming up through the pipeline too. The survey found that 73 percent of those surveyed who do not own a home said their goal is eventually to buy one.

The NAHB survey also found:

▪ 58 percent of Americans oppose eliminating the mortgage-interest deduction and 63 percent oppose lowering it. What’s more, 57 percent of those surveyed say they are less likely to support a candidate for Congress who wanted to eliminate the mortgage-interest deduction.
▪ Respondents were split on about requiring a 20 percent down payment to purchase a home: 49 percent were in favor and 49 percent opposed it. However, mortgage holders and renters aged 18 to 54 were more opposed to it: 58 percent of younger mortgage holders and 59 percent of younger renters opposed adding a 20 percent down payment requirement.

Source: “The Cook Report: The Home Front,” National Journal (June 2, 2011)

Owners, Renters Agree: Owning a Home is a Smart Decision

Here's good news about home ownership from the National Association of Realtors.

A substantial majority of both home owners and current renters agree that owning a home is a smart decision over the long term. That’s according to the results of a National Association of Realtors® survey of 3,793 adults conducted online by Harris Interactive.

The American Attitudes About Homeownership survey found that in today’s challenging economy, 95 percent of owners and 72 percent of renters believe that over a period of several years, it makes more sense to own a home. In addition, an overwhelming majority of home owners are happy with their decision to own a home – 93 percent of owners surveyed would buy again.

“Home owners and renters agree that home ownership benefits individuals and families, strengthens our communities, and is integral to our nation’s economy,” said National Association of Realtors® President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. “The results of this survey illustrate just how important issues related to home ownership are to people in this country.”

The survey uncovered some differences between home owners and renters, as well. While more than half of owners are “very” or “extremely” satisfied with the overall quality of their family life, only one-third of renters report the same levels of satisfaction. Similarly, 43 percent of home owners are very/extremely satisfied with their community life, compared with 30 percent of renters.

A majority of renters – 63 percent – said that it was at least somewhat likely that they would purchase a home at some point in the future. Among this group, young adults (18-29 years old) have the strongest aspirations for home ownership; only 8 percent of young adults said that it was “not at all likely” that they would purchase a home at some point in the future.

In today’s market, many aspiring home owners are faced with worries about job security and creditworthiness. Among renters who are very or extremely likely to buy a home in the future, three out of five consider confidence in job security and creditworthiness to be an obstacle.

One point of agreement between renters and home owners was support of the mortgage interest deduction (MID). Seventy-four percent of owners and 62 percent of renters say it’s “extremely” or “very” important that the MID remain in place.

“At a time when the middle class is under increasing economic pressures, both home owners and renters agree that the mortgage interest deduction should not be targeted for change,” said Phipps. “Given strong public support of and aspirations toward owning a home, we need to keep policies in place that support and encourage responsible, sustainable home ownership for our future.”

This survey was conducted online within the U.S. and fielded October 6-20, 2010. A total of 3,793 adults, 18 and older were surveyed, including 1,880 home owners, 1,115 renters, and 798 young adults. All samples came from the Harris Poll online database and were weighted for age, sex, race/ethnicity, education, region and household income to be representative of the U.S. general population of adults 18 and older. Propensity score weighting was also used to adjust for respondents’ propensity to be online. Results are available online at www.realtor.org/statsanddata/homeownership/attitudes_homeown.

Related articles

• Tax Advantages of First Time Home Buyers Explained (doorfly.com)
• Homeownership Returning To Sane Levels. Rejoice. (blogs.forbes.com)

Is "home ownership" a good investment?

Watch this short video. You might be surprised. Comments are welcome!

Rent or Buy?

Get home schooled!

Thanks to Mother Prudential for passing on this very helpful advice!

Educated Homeowners Surviving Housing Crisis

November 20, 2008 -- Realty Times Feature Article by Broderick Perkins

If the experts have said it once, they've said it a thousand times, but they can't say it enough.

Homeownership doesn't come with a manual.

It's up to you to learn what you are getting into before you embark on what's likely the most valuable acquisition you'll ever complete.

It's no surprise new mortgage modification programs, foreclosure assistance and bankruptcy laws come with mandated homeownership counseling.

When you get schooled on the issues of homeownership, you have much greater chance to continue as a homeowner -- even when the economy crashes down around you.

The foreclosure rate for low-income homeowners who attended homeownership education programs had a foreclosure rate that was 20 times less severe than that for subprime borrowers and three times better than that found in the prime mortgage market during the second quarter of 2008, according to data from NeighborWorks America, a staunch non-profit advocate for healthy communities.

"The facts tell the real story," says Kenneth D. Wade, CEO of NeighborWorks.

"The vast majority of mortgages facilitated by NeighborWorks organizations are to buyers with low and moderate incomes and less than perfect credit scores, yet by obtaining quality mortgage advice these homeowners have been able to sustain homeownership during the most severe housing crisis since the Great Depression," Wade added.

Long before homeownership counseling was de rigueur, South County Housing, a chartered NeighborWorks member in Gilroy, CA, was doling out a heavy curriculum of homeownership studies along with sweat-equity programs and loans that look a lot like subprime mortgages.

However, thanks to smarts the group gave its largely Latino buyers, South County's portfolio foreclosure rates today hover around zero, belying rates in the rest of foreclosure-hammered California.

There's more.

When NeighborWorks compared its total loan portfolio's foreclosure start rate of 0.21 percent in the second quarter of 2008, it found the overall nationwide homeowner market had a foreclosure rate more than five times as much, 1.08 percent.

Nationwide, the foreclosure start rate for only conventional conforming loans was 0.61 percent, compared to NeighborWorks' portfolio rate of 0.21 percent.

Buying a home today without learning what it takes to keep it, is like a trip to a Vegas -- for insights on both the money-losing potential in the casinos and the kind of widespread homeownership devastation that comes with ignorance.

Learned homeowners consistently out perform those without the lessons.

Says Wade, "The idea that some observers now are pointing to low-income people as the cause of the financial crisis we're facing today is just wrong. NeighborWorks organizations have a track record of providing one-on-one mortgage advice, encouraging homebuyers to avoid loans that they can not afford for the long term."

The message is brutally simple. Seek accredited homeownership counseling now and prepare in advance for your own home. Even if you already own your home, enroll in a counseling session.

There's plenty of counseling available. In October, the U.S. Department of Housing and Urban Development (HUD) doled out, to more than 2,300 local housing counseling agencies, $50 million in housing counseling training and housing counseling grants for first-time home buyers.

It's your tax money. Use it. Get home schooled.

Real estate myth 2

This is the continuation of a feature inspired by a conversation with an acquaintance who revealed a good deal of ignorance about the real estate profession. I think an educated market benefits everyone, so I intend to debunk as many myths as possible, one myth at a time. I hope you find this information useful. Please feel free to comment!

You'll hear many of these myths at the neighborhood barbecue.

Myth #2 'We made a ton of money on the place'

Has your house been a good investment? To get an answer, many folks simply look at how much they put down on their house, think about how much they might net after paying off the mortgage and then figure out the difference.

But this calculation leaves out all kinds of complicating issues, such as the intervening monthly payments that whittled down your mortgage debt and the home improvements that bolstered your home's value.

The calculation also ignores the continuing costs of home ownership, including property taxes, home insurance and maintenance expenses, as well as the costs of buying and selling the property. Maintenance costs might run to 2% of a home's value each year, while selling usually means forking over a brokerage commission equal to 6% of your home's value.

The calculation's real downfall, however, is that it looks at the wrong thing. As with many other investments, your home's total return includes both income and capital gains.

Over the past 25 years, homes have appreciated at one percentage point a year above inflation.

Thus, if inflation runs at 3% a year, your home might appreciate at 4% annually. Disappointed? Don't be. You don't just benefit from your home's appreciation. You also get to live in the place. How much is this worth? Think about how much you could collect each year if you rented out your house.

Suppose this annual rent is equal to 8% of your home's value. Add that to the 4% appreciation and your home's total return might be 12% a year, before costs. After expenses, your home's long-run performance probably won't rival stocks, but you should outpace the bond market.

Thanks to Jonathan Clements of The Wall Street Journal

Real estate myths

I believe that an educated market benefits everyone. I had a conversation this week with an acquaintance who was clueless about the real estate profession. I have him in mind as I start this new feature. You might have heard (or even believe) these myths--they're often perpetuated at the neighborhood summer get-togethers.

I hope you find this information useful. Please feel free to comment!

Myth #1 'The bank owns most of my house'

"I hear that statement a lot, and it makes no sense," says Chris Mayer, a real-estate professor at the University of Pennsylvania's Wharton School. "Suppose you buy a house for $250,000 and you put $50,000 down. You might think that you own 20% and the bank owns 80%. But if the house's value goes down $50,000, you lose $50,000 and the bank loses nothing."

Fortunately, the leverage that comes with a big mortgage usually works to enrich homeowners. Consider that $250,000 house bought with $50,000 down. If the home's value climbs just 20%, to $300,000, the value of your equity would double to $100,000.

Still, because of the debt involved, purchasing a house is a risky proposition. To get a better handle on the investment bets you are making, it can be helpful to consider your house separately from your mortgage. If your home's current value is $250,000, that is your real-estate exposure.

Meanwhile, think of your mortgage as a bond, suggests William Reichenstein, an investments professor at Baylor University in Waco, Texas. But in this case, instead of buying bonds and receiving interest, you are effectively selling a bond and paying interest.

What are the implications? Suppose you are retired with, say, $300,000 in bonds and $200,000 in stocks. You might think your portfolio is conservatively positioned.

But if you still have $125,000 outstanding on your mortgage, you would need interest from roughly $125,000 of your bonds to pay your mortgage interest. The bottom line: Your net bond position is really just $175,000, and thus your portfolio has more in stocks than bonds.

Thanks to Jonathan Clements of The Wall Street Journal