Keeping a Positive Perspective on Homeownership

Despite many negative headlines related to mortgage rates and housing inventory, it’s still a good time to buy a home because homeownership continues to provide many benefits, and foregoing homeownership today could be a costly decision.

Homeownership builds personal wealth through the growth of home equity, as illustrated by the accumulation of housing equity over every 10-year cycle since 1960 (see below).?The value of homeowner equity in the United States increased from approximately $9.0 trillion 2012 to approximately $29.3 trillion in 2022, according to Statista Research Department (July 2023).

And while home values were up only 2.3% last year compared to the previous year (April 2023 vs April 2022 as reported by CoreLogic, Inc. using Monthly Home Price Index (HPI).

Housing is more than an opportunity to build wealth. It provides a sense of community and pride of ownership.?It’s stability for a family or a place to build a family. Buying a home is still part of the American Dream for many. Fannie Mae forecasts 4.9 million homes will be purchased in 2024, and industry leading realtors and loan officers estimate they see 6 buyers for every home, or 30 million people are likely to seek one of the 4.9 million homes available this year.

The National Association of Hispanic Real Estate Professionals? (NAHREP) reports “The Hispanic homeownership rate is on the rise. Latinos continue to purchase homes in record numbers, with 2023 boasting a net gain of 377,000, the largest single-year gain in almost twenty years. Yet this growth did not happen on its own. Resiliency and ingenuity within the Latino community have led to sustained homeownership growth. Homebuyers have employed several strategies in order to overcome affordability challenges in recent years.” Some of those strategies involve buying in historically low-cost areas, buying smaller homes, using co-signors, and using local incentives and state housing programs.

Saving for a down payment continues to be a challenge for most people with higher costs of goods and services. While it's hard, would-be home buyers do not need a 20% downpayment. Low-down-payment options exist to help would-be homeowners. Buyers don’t need 20% down to purchase a house although the myth persists. The Federal Housing Administration (FHA) recently announced a reduction in mortgage insurance premiums, which will help many Americans that have higher debt-to-income (DTI) ratios and/or more challenging credit profiles. Private mortgage insurance (MI) is another option that many more use. Rarely has MI been more affordable than it is today, with premiums significantly less now than they were 20 years ago!?

MI is the original down payment assistance (DPA) – it was invented in 1957 so that lenders could lend to borrowers who make down payments of less than 20-25% with the peace of mind that MI was there to protect them from losses in the event the borrower defaults. Yes, MI protects lenders from potential credit losses, but consumers benefit by being able to access homeownership sooner than otherwise.

The recent headline news about National Association Realtors? (NAR) class action lawsuit and real estate commission is somewhat misleading. The proposed settlement merely prohibits making offers of compensation on the multiple listing service (MLS) to cooperating brokers or listing the commission in the MLS. The listing agent will continue to charge the seller a selling fee and buyers will be required to enter a contract with their buyer’s agent, if they choose to hire one, before they begin touring homes. The challenge will arise when the buyer doesn’t have the extra money to pay their agent. I suspect sales offers will be made outlining a seller’s concession in the amount of the buyer’s fee. However, it is premature to conclude anything definitively especially hyperbolic and declarative statements such as “no one will hire a buyer’s agent now.” I do believe it’s in the best interest of a first-time homebuyer to seek professional guidance in the process.

It is a fact that buying a house builds equity and wealth over a lifetime, but it’s more than wealth. It’s a home. It’s a community. It’s stability for a family. Had my father delayed his leap of faith to purchase that house in 1972 at a rate of 8%, he may not be a millionaire today.?

?Time will prove it’s still a good time to buy a home.

?By Terry Aikin, CMB?, AMP

?