Real Estate Shines as an Investment in 2015

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**source KCM A survey by The Joint Center of Housing Studies at Harvard University reveals that when a family is buying a home they consider the financial benefits of homeownership along with the social benefits. The survey mentions things like: Paying rent does not make sense Homeownership provides a good financial opportunity Owning a home helps you building family wealth Buying a home is investing in your retirement Home equity gives you something to borrow against So how did homeownership match up against other investments in 2015? Here is a chart that compares its return on investment against precious metals and the stock market last year:

Equity Matters A LOT… Just Ask Freddie Mac

There are many reasons, both financial and non-financial, that homeownership remains an important part of the American Dream. One of the biggest reasons is the fact that it helps build family wealth. Recently, Freddie Mac wrote about the power of home equity. They explained:

“In the simplest terms, equity is the difference between how much your home is worth and how much you owe on your mortgage. You build equity by paying down your mortgage over time and through your home's appreciation. In a nutshell, your money is working for you and contributing toward your financial future.”

They went on to show an example where a person bought a home for $150,000 with a down payment of 10% ($15K), resulting in a loan amount of $135,000. The buyer secured a 30-year fixed-rate mortgage at 4.5% with a monthly mortgage payment of $684.03 (not including taxes and insurance).

The chart below demonstrates the home equity built after 7 years of making mortgage payments and assuming the historic national average of 3% per year home appreciation:

And that number continues to build as you continue to own the home.

Merrill Lynch published a report earlier this year that showed the average equity homeowners have acquired by certain ages.

Bottom Line

Home equity is important to building wealth as a family. Referring to the first scenario above, Freddie Mac explained:

“Now, if you continued to rent, and made the same payment of $684.03 per month, you'd have zero equity and no means to build it. Building equity is a critical part of homeownership and can help you create financial stability.”

Put your housing cost to work for you and your family. Meet with a real estate professional today to explore your options.

Slaying Myths About Buying A Home

Some Highlights:

• Interest Rates are still below historic numbers.
• 88% of property managers raised their rent in the last 12 months!
• Credit score requirements to be approved for a mortgage continue to fall. The 723 average score is the lowest since Ellie Mae began reporting on scores in August 2011.
• The average first-time home buyer down payment was 6% in 2015 according toNAR.

Mortgage Rates Over The Last 40 Years [INFOGRAPHIC]

Some Highlights:

• 30-year mortgage rates are projected to increase by a full percentage point in 2016
• Rates are still well below the past four decade averages
• The interest rate at which you borrow the funds to purchase your dream home makes a huge difference on your monthly payment

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Is the Housing Market Back? Ask Lowes & Home Depot!

A recent Bloomberg Business article reports that both Lowes & Home Depot experienced fourth quarter profits that beat revenue projections by the most in six quarters. So what does that mean to the housing market?

Consumer Confidence

Lowe’s Chief Executive Officer Robert Niblock said,

“Consumers are feeling better about their jobs, their wages and certainly feeling better about the value of their home, they are re-engaging in projects that they have put off.”

Sales to professional contractors have increased significantly as well, and were a driving factor in the quarter. Home Depot’s Chief Financial Officer Carol Tome calls this a “sign of health. If they are putting more items in their basket, it means they have work coming at them.”

Home Values Rising

In a quarterly consumer survey conducted by Lowe’s since 2007, the percentage of respondents who said that the value of their home is rising increased to its highest value ever, at 50%.
Whether Americans are finally adding that man-cave they’ve always wanted, or renovating a master suite, an increased confidence in the value of one’s home often sparks homeowners to invest in big-ticket projects.
The National Association of Realtors (NAR) reports that the median price of an existing home (for all housing types) rose year-over-year for the 35^th consecutive month.
Not all who are renovating are planning on staying in their home. The Demand Institute reports that “nearly half of American households plan to move at some point in the future.”
For those who are planning on listing their home this spring, spending the time and money needed to update that 1950’s bathroom or kitchen can fetch higher prices in today’s market.

Bottom Line

Meeting with a local real estate professional can give you insight into the small (or big) improvements your home could use to draw the highest price and return on investment this spring.

Source KCM
Luis B. Martinez
Next Top Realtor
San Fernando City Mission

The Difference Between A Home’s Cost vs. Price

As a seller, you will be most concerned about ‘short term price’ – where home values are headed over the next six months. As either a first time or repeat buyer, you must not be concerned only about price but also about the ‘long term cost’ of the home.

Let us explain.

There are many factors that influence the ‘cost’ of a home. Two of the major ones are the home’s appreciation over time, and the interest rate at which a buyer can borrow the funds necessary to purchase their home. The rate at which these two factors can change is often referred to as “The Cost of Waiting”.

What will happen in 2015?

A nationwide panel of over one hundred economists, real estate experts and investment & market strategists project that home values will appreciate by almost 4% by the end of 2015.
Additionally, Freddie Mac’s most recent Economic Commentary & Projections Table predicts that the 30-year fixed mortgage rate will appreciate to 4.5% by the end of 2015.

What Does This Mean to a Buyer?

Here is a simple demonstration of what impact these projected changes would have on the mortgage payment of a home selling for approximately $250,000 today:

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Moving Across America [INFOGRAPHIC]

-Source KCM
-Next top Realtor/Real Estate Agent
-Next top San Fernando Valley Realtor