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New Study: Homeownership Creates Family Wealth

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New Study: Homeownership Creates Family Wealth | Simplifying The Market Matthew Rognlie, from the Department of Economics at MIT, recently released a paper: Deciphering the Fall and Rise in the Net Capital Share. One of the major findings of the report is that homeownership is and has been for the last fifty years a major component to family wealth. An article on the study in The Economist notes one of the findings of the study:
“The return on non-housing wealth, in fact, has been remarkably stable since 1970. Instead, surging house prices are almost entirely responsible for growing returns on capital.”
This came as no surprise to us as the Federal Reserve previously reported that the net worth of families that own their own home is 36 times greater than that of families that rent.

Bottom Line

HousingWire’s Senior Financial Reporter, Trey Garrison, summed it up well in his reporting on Rognlie’s study:
“Homeownership has consistently created generational wealth more reliably, and more ‘democratically’, than any other asset class. And it does so in a manner entirely ancillary to its primary purpose of giving you a place to lay your head and keep your stuff.”
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The Difference A Year Can Make [INFOGRAPHIC]

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The Difference A Year Can Make [INFOGRAPHIC] | Simplifying The MarketThe Difference A Year Can Make [INFOGRAPHIC] | Simplifying The Market

Some Important Points To Consider:

  • The latest Freddie Mac Primary Mortgage Market Survey reports the 30-year fixed rate at 3.7%.
  • Freddie Mac's projection for Q2 2016 is that the rate will be 4.7% (a full percentage point higher)
  • The Home Price Expectation Survey predicts that home prices will appreciate by 4.4% during this same time

The impact waiting a year to purchase your dream home can make on your monthly payment is significant. Contact me today to discuss your options before the experts' predictions become reality!

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Selling Your House? Price it Right Up Front

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Selling Your House? Price it Right Up Front | Simplifying The Market In today’s market, where demand is outpacing supply in many regions of the country, pricing a house is one of the biggest challenges real estate professionals face. Sellers often want to price their home higher than recommended, and many agents go along with the idea to keep their clients happy. However, the best agents realize that telling the homeowner the truth is more important than getting the seller to like them.

There is no “later.”

Sellers sometimes think, “If the home doesn’t sell for this price, I can always lower it later.” However, research proves that homes that experience a listing price reduction sit on the market longer, ultimately selling for less than similar homes. John Knight, recipient of the University Distinguished Faculty Award from the Eberhardt School of Business at the University of the Pacific, actually did research on the cost (in both time and money) to a seller who priced high at the beginning and then lowered the their price. In his article, Listing Price, Time on Market and Ultimate Selling Price published in Real Estate Economics revealed:
“Homes that underwent a price revision sold for less, and the greater the revision, the lower the selling price. Also, the longer the home remains on the market, the lower its ultimate selling price.”
Additionally, the “I’ll lower the price later” approach can paint a negative image in buyers’ minds. Each time a price reduction occurs, buyers can naturally think, “Something must be wrong with that house.” Then when a buyer does make an offer, they low-ball the price because they see the seller as “highly motivated.” Pricing it right from the start eliminates these challenges.

Don’t build “negotiation room” into the price.

Many sellers say that they want to price their home high in order to have “negotiation room.” But, what this actually does is lower the number of potential buyers that see the house. And we know that limiting demand like this will negatively impact the sales price of the house. Not sure about this? Think of it this way: when a buyer is looking for a home online (as they are doing more and more often), they put in their desired price range. If your seller is looking to sell their house for $400,000, but lists it at $425,000 to build in “negotiation room,” any potential buyers that search in the $350k-$400k range won’t even know your listing is available, let alone come see it! A better strategy would be to price it properly from the beginning and bring in multiple offers. This forces these buyers to compete against each other for the “right” to purchase your house. Look at it this way: if you only receive one offer, you are set up in an adversarial position against the prospective buyer. If, however, you have multiple offers, you have two or more buyers fighting to please you. Which will result in a better selling situation?

The Price is Right

Great pricing comes down to truly understanding the real estate dynamics in your neighborhood. Look for an agent that will take the time to simply and effectively explain what is happening in the housing market and how it applies to your home. You need an agent that will tell you what you need to know rather than what you want to hear. This will put you in the best possible position.
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Industry Experts Agree: Housing Supply Too Low

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Industry Experts Agree: Housing Supply Too Low | Simplifying The Market Last week, we reported on the lack of housing supply and how that was impacting the real estate market. Today, we want to let you know what other industry experts are saying. Daren Blomquist, RealtyTrac Vice President:
“It’s kind of a seesaw right now between supply and demand. One of the reasons for fewer sales is not so much a lack of demand but a lack of supply, especially in the price range the majority of buyers were looking for.”
Diana Olick, CNBC’s Realty Check:
“Total sales are still running below expectations for the year. Don't blame winter weather, though. Blame the lack of supply.”
Bill McBride, Founder of Calculated Risk:
“Inventory is still very low (down 0.5% year-over-year in February). This will be important to watch over the next month at the start of the spring buying season.”
Lawrence Yun, Chief Economist at the National Association of Realtors:
“Insufficient supply appears to be hampering prospective buyers in several areas of the country and is hiking prices to near unsuitable levels. Stronger price growth is a boon for homeowners looking to build additional equity.”
Realtor.com
“The National Housing Trend Report shows that inventory has decreased 10.9 percent year over year.”

And some experts are actually calling it a “seller’s market”

Forbes.com
“Tight inventory is a main reason the ball is still in the sellers' court.”
Bill Banfield, VP of Quicken Loans:
“We’re a bit low on the supply-side which could force prices up for buyers, further hammering home that we’re in a seller’s market.”

Bottom Line

If you are debating putting your home on the market this year, now may be the time. The amount of buyers ready and willing to make a purchase is at the highest level in years. Contact a local professional in your area to get the process started.
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