With so much information circulating the real estate industry, there is one prevailing concept in particular that oft goes neglected—why home ownership matters. We know it makes a difference, but many don’t know why it makes a difference. Luckily, I just came across this article that does a fantastic job of explaining of why owning a home matters. Check it out here!
Just as inequality is present in social and cultural sects of society, so too is it present in real estate. In fact, where you live can have an enormous effect on your future net worth. Right now, the United States’ most expensive residential markets are appreciating at faster rates than their less expensive counterparts. How fast? Two times.
Whereas in 1986, the average price in America’s most expensive market hovered around $127,058, it is now at $493,504. Comparatively, the average price of a home in the least expensive market was $52,022 in 1986. Now it’s $117,827. That means homes in the more expensive bracket increased at an incredible 320% faster than the less expensive markets.
That, in turn, indicates that buyers who were able to purchase more expensive homes previously have seen a much, much larger return on their investment, which further means that their descendants will have access to considerably more wealth than others. Thus, inequality is further bolstered in full force.
Additionally, this discrepancy is not likely to change anytime in the near future. If anything happens at all, it is bound to take generations. The influencing factors are simply so broad, so expansive, that to enact any real lasting change will be an immense project. The rising costs are primarily due to income growth and housing supply.
In more expensive markets, buyers have more money and more income. This means they can afford to buy more expensive homes. This ability then translates to higher competition and thus faster growth and appreciation.
Just as well, less expensive markets generally have more building activity, which means more supply, which means less expensive homes. So demand does not increase to the extent it would, say, in San Francisco, because more homes are being built, so there are more homes to choose from, and by extension less reason to push up prices.
If you’re looking to maximize home appreciation rates, these are the cities with the largest return since 1986:
San Francisco, California
San Jose, California
Orange County, California
Los Angeles, California
San Diego, California
In the wake of the 2008 recession and the housing market’s collapse, millions of Americans were subject to foreclosures and penalized credit reports. Seven years ago, foreclosed home rates reached their peak, and now, those impacted credit scores are finally beginning to fade. What does this mean? Well, for one, it means more Americans can finally start improving their credit scores again, which means the housing sector has the chance to benefit enormously.
Ralph MacLaughlin, Chief Economist at real estate search engine, Trulia, puts two and two together, “Improving credit scores might entice households to start borrowing more in general.” This means that the housing market is increasing exponentially because there are many more prospective consumers. Not to mention, interest rates are much lower than traditional standards because of the significant reduction in activity since 2008.
So, decreased interest rates and more able consumers spell great news for the real estate industry at large. Additionally, there have been sustained gains in employment as well, along with bigger increases in pay, which gives prospective consumers even more capital with which to purchase homes and thus increase the housing sector as a whole.
Now, while this all makes crystal clear sense in theory, the numbers are a bit more difficult to quantify. What we do know for sure is that the number of consumers with a new foreclosure added to their credit reports reached a record-high in 2009 at 566,000. According to the three major players in consumer credit scores and reports, Experian Plc, Equifax Inc., and Transunion, foreclosures and short-sales (when a home is sold for less than what’s owed on it) usually roll off these negative reports seven years later. Considering it’s 2016 and the peak happened in 2009, that roll-off would happen right about…now.
This should manifest itself in a stronger demand for homes, which could mean higher spending on durable goods like appliances and furniture. Just as well, formerly afflicted consumers may also feel more comfortable applying for new credit cards, auto loans, and other various loans, which, overall, is good news for the economy (so long as the loans are responsibly approved). This credit repair could feasibly in and of itself aid people in repairing their financial standing by then reducing their borrowing costs, which would ideally free up money that could be used to further general consumption.
I suppose, to put it frankly, real estate is back. Interest rates are low; and I expect we will see a surge in homeownership very, very soon.
One of the hottest real estate apps on the market is BiggerPockets. This unique app allows you to easily engage in the BiggerPockets Forums to answer or ask questions about real estate at any time. Networking doesn’t get easier much easier than that. Right now the app is only available on the iOS system – which means you need to have an Apple product to use it, but an Android app is being discussed for development in the future as well.
Another app you should download asap is MagicPlan. It allows you to create custom floor plans by just moving your phone or iPad around the room taking pictures. Yes, it is that easy to use. This app is great because you can quickly and easily make floor plans. Now, when selling a property you can now include floor plans, which makes your property even more marketable!
HammerPoint is an app that allows you to create detailed repair estimates for any job. You also have the ability to create new reports for each project. The app will actually guide you through each item that may need repairing and it will even offer you a suggested cost for that repair. This can be especially helpful for house flippers who are about to embark on a large remodel.
Houzz Interior Design Ideas
This is an awesome app that can become extremely addicting after just a one time use. It allows you to navigate through over a million high-quality photos of properties to get ideas and inspirations for your own properties. However, having the ability to scan through these beautiful photos can make you want to spend a lot more money on a remodeling job. This is one of the best apps on the market for getting ideas for your properties and even for you own house.
CardMunch is a great opportunity for real estate investors to network and grow their business. At the palm of your hand, you are able to snap photos of business cards from Networking events, and scan them into CardMunch so you can connect with those individuals on LinkedIn and start building relationships online.