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Real Estate Is Still the Best Long-Term Investment [INFOGRAPHIC]

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Some Highlights

  • According to a recent poll from Gallup, real estate has been voted the best long-term investment for twelve straight years.
  • That’s because a home is so much more just than a roof over your head. It’s also an asset that typically grows in value over time. 
  • If you’ve been debating if it makes more sense to rent or buy, connect with a real estate agent to talk about why homeownership can be a better bet in the long run. 

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Time in the Market Beats Timing the Market

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Trying to decide whether it makes more sense to buy a home now or wait? There’s a lot to consider, from what’s happening in the market to your changing needs. But generally speaking, aiming to time the market isn’t a good strategy – there are too many factors at play for that to even be possible.

That’s why experts usually say time in the market is better than timing the market.

In other words, if you want to buy a home and you’re able to make the numbers work, doing it sooner rather than later is usually worth it. Bankrate explains why: 

“No matter which way the real estate market is leaning, though, buying now means you can start building equity immediately.” 

Here’s some data to break this down so you can really see the benefit of buying now versus later – if you’re able to. Each quarter, Fannie Mae releases the Home Price Expectations Survey. It asks over one hundred economists, real estate experts, and investment and market strategists what they forecast for home prices over the next five years. In the latest release, experts are projecting home prices will continue to rise through at least 2029 – just at a slower, more normal pace than they did over the past few years (see the graph below):

a graph of a number of green rectanglesBut what does that really mean for you? To give these numbers context, the graph below uses a typical home value to show how it could appreciate over the next few years using those HPES projections (see graph below). This is what you could start to earn in equity if you buy a home in early 2025. 

a graph of growth of a houseIn this example, let’s say you go ahead and buy a $400,000 home this January. Based on the expert forecasts from the HPES, you could gain more than $83,000 in household wealth over the next five years. That’s not a small number. If you keep on renting, you’re losing out on this equity gain.

And while today’s market has its fair share of challenges, this is why buying is going to be worth it in the long run. If you want to buy a home, don’t give up. There are creative ways we can make your purchase possible. From looking at more affordable areas, to considering condos or townhomes, or even checking out down payment assistance programs, there are options to help you make it happen.

So sure, you could wait. But if you’re just waiting it out to perfectly time the market, this is what you’re missing out on. And that decision is up to you.

Bottom Line

If you’re torn between buying now or waiting, don’t forget that it’s time in the market, not timing the market that truly matters. Connect with an agent if you want to talk about what you need to do to get the process started today.

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Equity

How Home Equity May Help You Buy Your Next Home in Cash

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Building equity in your house is one of the biggest financial advantages of homeownership. And right now, homeowners across the country are sitting on record amounts of it.

Here’s a look at how that equity could be a game changer for you, and why it’ll flip your perspective from “Why would I move right now?” to “Why wouldn’t I?

Home Equity: What Is It?

Home equity is the difference between how much your house is worth and how much you still owe on your mortgage. For example, if your house is valued at $400,000 and you only owe $200,000 on your mortgage, your equity would be $200,000.

Why Equity Is Such a Big Deal for Homeowners Looking To Sell

Recent data from the Census and ATTOM shows how significant today’s home equity really is. In fact, more than two out of three homeowners have either completely paid off their mortgages (shown in green in the chart below) or have at least 50% equity in their homes (shown in blue in the chart below):

a pie chart with textAnd that’s a big deal. Think about it: 2 out of 3 homeowners have at least 50% equity in their homes. To put a more tangible number on it so you can think about what that really means for someone like you, CoreLogic shows the average homeowner has $311,000 worth of equity built up. That kind of net worth can go a long way if you’re trying to make a move.

And that’s part of the reason why the share of all-cash buyers recently reached a new high. According to an annual report from the National Association of Realtors (NAR), 26% of buyers were able to buy without a mortgage (see graph below):

a graph with numbers and linesImagine buying your next house in cash. No mortgage. No monthly payment. No interest rate to mess with. If you want to find out how much equity you have to see if that’s an option for you, connect with a real estate agent and ask for a professional equity assessment report (PEAR).

Who knows, you may find out you have enough equity to buy your next place outright– and with today’s mortgage rates, not having to take out a home loan is pretty incredible. Even if you don’t have enough equity to buy in all cash, you may still have enough to make a larger down payment, which has its own benefits too.

Bottom Line

Homeowners have an incredible amount of equity today – and that’s why the share of all-cash buyers is on the rise. To see how much equity you have and talk through how it can help fuel your next move, connect with an agent.

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Why Today’s Mortgage Debt Isn’t a Sign of a Housing Market Crash

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One major reason why we’re not heading toward a foreclosure crisis is the high level of equity homeowners have today. Unlike in the last housing bubble, where many homeowners owed more than their homes were worth, today’s homeowners have far more equity than debt.

That’s a big part of the reason why even though mortgage debt is at an all-time high, this isn’t 2008 all over again. As Bill McBride, Housing Analyst for Calculated Risk, explains:

“With the recent house price increases, some people are worried about a new housing bubble – but mortgage debt isn’t a concern . . .”

Today’s homeowners are in a much stronger position than ever before. So, let’s break it down and see why today’s mortgage debt isn’t anything to fear.

More Equity, Less Risk of Foreclosures

According to the St. Louis Fed, total homeowner equity is nearly triple the total mortgage debt today (see graph below):

a graph of a graph showing the rise and fall of mortgagesHigh equity makes it less likely for homeowners to face foreclosure because they have more options. If someone struggles to make their mortgage payments, they could potentially sell their house and still come out ahead thanks to their built-up equity.

Even if home values were to dip, most homeowners would still have a comfortable cushion of equity. That’s a big contrast to the 2008 crisis, where many homeowners were underwater on their mortgages and had few options to avoid foreclosure.

Delinquency Rates Are Still Near Historic Lows

Another reassuring sign is that, according to the NY Fed, the number of mortgage payments that are more than 90 days late is still near historic lows (see graph below):

a graph showing a line going downThis is partly due to a variety of programs designed to help homeowners through temporary hardships. As Marina Walsh, VP of Industry Analysis at the Mortgage Bankers Association (MBA), says:

“. . . servicers are helping at-risk homeowners avoid foreclosures through loan workout options that can mitigate temporary distress.”

So, even if someone falls behind on their payments, there are support systems in place to help them avoid foreclosure.

Low Unemployment Helps Keep the Market Stable

One other important factor is today’s low unemployment rate. More people have stable jobs, which means they’re better able to afford their mortgage payments. As Archana Pradhan, Principal Economist at CoreLogic, explains:

“Low unemployment numbers have helped reduce the overall delinquency rate . . .”

During the last housing crisis, unemployment was much higher, which led to a wave of foreclosures. Today’s unemployment rate is very different (see graph below):

a graph of employment and financial crisisThat stability in how many people are employed is one of the reasons the market doesn’t have the same risks as it did the last time.

There’s no need to worry about a wave of distressed sales like the one we saw in 2008. Most homeowners today are employed and have low-interest mortgages they can afford, so they’re able to make their payments. As McBride states:

“The bottom line is there will not be a huge wave of distressed sales as happened following the housing bubble.” 

Bottom Line

While mortgage debt is high, rest assured the market isn’t on the brink of another crash. Instead, most homeowners are in a strong position. If you have questions or concerns, connect with a local real estate agent.

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The information contained, and the opinions expressed, in these article are not intended to be construed as investment advice. Let's Talk Real Estate and Keeping Current Matters, Inc. do not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Let's Talk Real Estate and Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.