Posts Tagged ‘homeownership’

Intero Insider: Young Wait for Homeownership – It’s about Money, Not Values

By Gino Blefari | December 20th, 2011 0 Comments

Millennials – the generation generally defined as those born between 1980 and the mid-1990s – have no interest in buying homes. Or, at least, that’s the latest argument we’re seeing in Forbes, dubbed “Attitudes of Young Americans Bode Ill for Housing.” But, is this really the case? My sense is that it’s much more circumstantial than a foreboding ill will toward homeownership.

The argument hinges on a few key facts and observations: 1) Millennials, for the most part, have no money. The author states that 90% of U.S. born millennials (or “Echo Boomers”) has less than $1,500 in assets. 2) Millennials value education, people and leisure more than other American generations. And 3) Millennials question the importance of homeownership.

No money, no house

That’s the reality of today’s lending market, to be exact. Lenders no longer write no-money down mortgages so it makes sense that a group that generally is strapped for cash wouldn’t be interested in buying a home. Remember too that this generation also is saddled with the highest average amount of school debt than any other before it. They’re facing a tight job market that offers little opportunity for high wages. Putting yourself in these shoes for a moment makes it loud and clear why buying a home – the largest purchase of your life – is not going to be top of mind.

It’s all about the experience of life

Studies have shown that millennials are taking much longer to “settle down” in a career and lay roots in one place. They are taking longer to get married – if at all – and delaying children. These are all life circumstances that tend to spark a home purchase.

The housing boom and bust have left scars

Many millennials express skepticism about housing because they’ve witnessed an unprecedented crazy time in real estate. They may have witnessed their parents cash out tens of thousands of dollars in home equity only to see their home values plunge to depressing levels a few years later.

Any rational person would rightfully walk carefully into a real estate experience after this.

Are millennials really saying they don’t value homeownership or is what they’re really saying that they’d rather wait until they are ready? Who wants a mortgage payment when you’re still traveling the world, experiencing different jobs and career paths and haven’t yet taken the plunge with a lifelong mate? Can’t blame them for that, really.

These folks are still young. The economy is still not optimal for them. I don’t believe for one minute that a delay in home buying has anything to do with millennials’ true view of homeownership. This can be easily seen by the fact that young entrepreneurs who strike it rich almost immediately make a run for real estate. (The San Francisco Chronicle recently discussed this in an article looking at increasing home values in city neighborhoods that seem to be impacted directly by the success of young tech companies like Zynga and Yelp.)

Millennials will come around to homeownership eventually. Although that delay is what will most impact the recovering market, it’s got nothing to do with values.

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From luxury to bank-owned, a review of this summer’s real estate market

By Teressa Francis | August 30th, 2011 1 Comment

This Intero Insider – Video Series brings you Dominic Nicoli, one of our top real estate agents at Intero Real Estate Services from the Los Altos office. He speaks candidly with Intero COO Tom Tognoli and shares his insight and projections on today’s real estate market from luxury real estate to foreclosures – where we have been, where we are now, and where we are headed.

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Intero Insider: How to Save $67,960 on Your Next Home Purchase

By Gino Blefari | August 18th, 2011 0 Comments

Standard & Poor’s downgrade of the U.S. debt rating this month sparked speculation about what the effects would be on stock, bond and key interest rate markets. A lot of conversations centered around the prediction that interest rates for mortgages would increase dramatically, damaging an already delicate housing recovery.

So far, the opposite is true. We’re talking down, down and down again. In the tumultuous days following the S&P downgrade, rates on 30-year fixed-rate mortgages fell to 4.32%, according to Freddie Mac’s Primary Mortgage Market Survey.

I realize I’m the CEO of a real estate company so you’d expect me to say this: But, now truly is an opportune time to borrow money for real estate if your finances are in a solid, healthy state. Borrowers who lock in super low rates stand to save a substantial amount of money over the life of a mortgage.

Take this example: A borrower with a $450,000 30-year mortgage with a 4.3% interest rate would have a monthly payment of $2,227 and pay a total of $351,692 in interest. If their rate on their fixed-rate mortgage had been 5%, they’d pay $2,416 a month and $67,960 more in interest over the 30 years.

Substantial!

Could rates go even lower? Who knows? Seriously. We don’t know. However, S&P also downgraded Fannie Mae and Freddie Mac, which means borrowing could get more expensive for the mortgage giants. That increase likely gets passed on to consumers.

Even if you refinanced last year at an average 5.5%, a rate drop to below 4.5% is worth a check-in on the math of refinancing. When rates really do start moving up, you don’t want to look back and think “I wish I’d…”

Interest rates really do matter. So if you are on the fence or if you’re an agent with buyers who are on the fence, do some math to see your/your client’s total savings. It’s as good a time as any to borrow money. Talk to your mortgage advisor today!

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Why the Fed’s Role in Housing is Important

By Gino Blefari | May 3rd, 2011 0 Comments

The big debate in the housing industry this year is over the federal government’s role in the mortgage finance system. Our biggest industry group, the National Association of Realtors, favors a continued federal presence. But, others do not. What is this debate all about and why is it important?

As we’ve noted before here, a couple of issues that are on the Congressional table would have a direct impact on home buyers and homeowners:

  1. The mortgage interest deduction
  2. Government backing conventional mortgage securities through Fannie Mae and Freddie Mac

The mortgage interest deduction is a tax boost many homeowners enjoy. It enables those who itemize their deductions to deduct the interest they pay on their mortgages from their income tax bill. For many years, it’s been a great selling point for many homeowners, saving them money and offering a small break on the costs of ownership.

Congressional groups have been eying the deduction as a possible source of instant revenue for the nation, and have talked about putting restrictions on it or doing away with it altogether.

I think the government’s role here is critical, and taking away this benefit of homeownership at a time when Americans are struggling and the housing market is still trying to recover is a big mistake.

What about Fannie Mae and Freddie Mac? Does the government need to continue to prop up these financiers? And if so, at what cost?

Fannie and Freddie’s role thus far has been two-fold: buying mortgages, securitizing them and selling them to investors in order to free up funds for more home buyers; and setting underwriting standards.

There’s no doubt that these two entities cannot continue operating the way they were during the boom and bust. But without a federal role in backing mortgage finance, there’s always the chance that the private market would freeze up in tough times, leaving no available money to the nation’s borrowers who are willing and able to become homeowners.

In that case, a bad situation gets worse. Fewer and fewer people are able to buy homes without the 30-year mortgage that’s historically played a vital role in boosting home ownership.

I don’t know what the answer is for how to structure a new system for the government to be involved in backing mortgage finance, but it’s clear to me that it’s important. Homeownership continues to be a source of economic stability for the majority of owners out there – despite the recent years of record foreclosures.

And as we’ve seen in recent surveys, the majority of Americans still have faith in home ownership. We need the federal government to show its faith too, and stay involved without getting in the way – a difficult dance we’ll be discussing more in the months to come.

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Intero Insider: Younger Americans Still Keen on Homeownership

By Gino Blefari | March 1st, 2011 1 Comment

The housing market may not have the rosiest headlines in town, but there are some great things happening if you open up the hood and look closely. Here’s one:

Younger Americans still like the idea of owning a home. The 18- to 34-year-old demographic (also known as Generation Y) in a recent Fannie Mae survey said they believe buying a home has a lot of potential as an investment, despite their peers seeing the steepest decline in ownership during the housing decline.

In fact, this group, along with Hispanics and African-Americans were more positive about homeownership than any other Americans.

In the spirit of helping younger Americans bring their homeownership dreams to life, here are four pieces of advice for making it happen:

1. Start saving as early as you can. Banks have been more stringent with downpayment requirements and there are a number of initiatives in Congress right now that may end up increasing downpayment requirements even more.
2. Don’t wait too long. With interest rates low and supply levels high in many areas, now really is a great time to buy. However, many expect the loan process to get even harder and rates to increase this year so these conditions won’t last forever.
3. Think long-term. Real estate is for the long haul and much more difficult to unload than a stock portfolio. Figure out where you want to be in 5-10 years and then zero in on your real estate goals.
4. Find a Realtor you trust. Real estate is difficult – even for the most intelligent buyers out there. Having an agent you are comfortable working with is priceless when it comes to navigating the process and dealing with unexpected twists and turns.

It’s good to see that owning a home still holds prominence in the minds of young Americans. A lot of folks have speculated that this group would end up not valuing homeownership as much as their parents and grandparents because of the financial collapse, recession and rising cost of ownership compared to personal incomes.

I think it’s a sign that real estate is not and will never be dead.

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Intero Insider: Down payment assistance makes a comeback

By Gino Blefari | January 12th, 2011 1 Comment

Down payment assistance programs have been through the ringer in recent years, but now seem to be making a comeback. According to a Smart Money article I read this week, the number of programs across the country now stands at around 1,000 and has increased 3% to 5% in just the last six months.

What does this mean for home buyers, home sellers and the market as a whole? I think it’s a nice positive incentive and help for what continues to be one of the biggest hurdles to homeownership, the down payment – especially in high-cost areas like California and our own Bay Area and Silicon Valley.

Down payment assistance essentially comes in the form of programs that offer either grants or low/no-interest loans to qualifying first-time home buyers, or buyers who haven’t owned in awhile. Programs obviously vary, but generally there is an income and home value limit that qualifies a buyer. It can be a lifesaver for qualified buyers in places like San Francisco, where 20% down on an average home easily costs in the six figures.

Banks in the past had been reluctant to work with these programs because the borrowers who qualify were seen as risky. But that seems to be what’s changed this time around. Lenders are more willing to work with these borrowers now.

Programs like these are great for buyers in need of help. But they’re also good news for the market as a whole. Remember: first-time buyers especially are a significant piece of the housing market food chain. We need first-time buyers to create demand that fuels sales at the lower end of the market – and those sales in turn fuel sales for move-up buyers. Any move this year that can help create demand – especially in a market segment that needs it – will result in a positive effect to the market.

I applaud this new movement toward down payment assistance and hope that we will see more positive help to buyers and the market like this going forward.

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Intero Insider: Homeownership’s New Image

By Gino Blefari | September 28th, 2010 0 Comments

Attitudes about home ownership are changing. The latest housing topic to hit the headlines is the notion that the allure of owning a home isn’t what it used to be – and for many reasons. For those struggling with job security or unemployment, owning a home looks more like an economic trap than a path to economic security.
 
As with most housing news, this sounds so grim on the surface. But there really is a glimmer of hope and good news if you dig. These changing attitudes are bringing back a healthy outlook on ownership: owning a home is a lifestyle first, not an investment choice.
 
True, owning a house under normal circumstances can be the best way to build some financial security. But it’s not a mutual fund or stock portfolio.
 
Even through the housing boom, you’d find that the shrewdest real estate counselors would say not to view your house as a financial investment like stocks. Neighborhoods are not markets. Patios, kitchens and yards are not trading floors – these are the floors where we live our lives and create memories with our families.
 
Now that the market has taken a tumble, we are finding our way back to these basics. A recent story in the Wall Street Journal covered a survey from Fannie Mae that showed a decline in the number of people who consider housing a safe investment.
 
But guess what? No investment is safe. Just ask all the folks you know who had planned to retire early only to watch their 401(k)s get eaten alive by the financial collapse in 2008 and 2009.
 
The real point here, though, is that housing for the average American cannot be approached from purely an investment standpoint. We all know it’s much more than that. It’s your home first. It’s your lifestyle. It’s your family’s gathering place. And it’s also a way to build savings in an asset rather than give your monthly housing check to a landlord.
 
So when I hear that fewer people now see housing as a safe “investment,” I think that it’s good that fewer people are looking at it in those terms. I’m willing to bet that as soon as we see some real movement on job creation, that sense of security will start to spread through America once again.
 
And what’s the first thing you’ll see folks do when they are more financially secure in their jobs? Buy a house, of course – because, hey have you seen how great the market is for buyers right now?

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Intero Insider: Why Plunging Home Sales Won’t Kill Real Estate

By Gino Blefari | August 31st, 2010 0 Comments

The latest housing news is pretty grim: existing home sales fell 27.2 percent in July from the previous month to 3.3 million, the lowest in more than a decade. We’re definitely seeing the expected drop-off coming off the end of the home buyer tax credit.

Most of us saw this coming. The very point of the home buyer tax credit was to pump life into the market and entice buyers to move off the fence. Take it away and you’re merely peeling back the covers from the real situation, showing that many potential buyers are tepid, scared of losing their jobs, optimistic that prices will come down just a little more, or simply not able to get a loan.

Amid this news, the New York Times featured a story saying that housing is no longer considered a means to build wealth.

But that’s where I need to stop and think.

There’s no getting around the fact that the market is slow and expected to be slow through the end of the year. True.

And there’s no question that flipping houses is not the part-time moneymaking hobby it once was during boom years. Very true.

But to swear off real estate as a means to build wealth is a bit dramatic. It’s true that in most cases, a buyer cannot look at a house solely as a monetary investment. It’s simply not that – it’s more. It’s a roof over your head. It’s the place where your children grow from toddlers to young adults. It’s where you spend your days and nights living your life.

A home is shelter, but it’s also ownership. Last I checked, you can’t really put a price on the kind of pride that comes with homeownership. Ask anyone whether it’s a dream of theirs to own a home and you’ll likely hear a resounding “yes.”

Again, it’s the intangibles of real estate that will keep this market alive.

A home is not a casino slot machine. It’s not a mutual fund. But it is a relatively safe way to spend your monthly housing budget. In the long-term, homes will still return value to their owners – and while it may not be in the form of doubling your returns, it is a true asset, a thing that you own free and clear after the mortgage is paid.

At the end of the loan, it’s still yours, not the landlord’s or the bank’s. Yours.

So even amid a declining market while analysts and pundits decry real estate a non-wealth builder, a dead end, myself and 60 million+ other homeowners disagree. We decided to put our money into our homes and are proud of it. I don’t think that sentiment is going to change overnight.

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