THERE IS A LOT OF NOISE WHEN IT COMES TO REAL ESTATE NEWS--HOW TO DECIPHER?

A lot of people are certainly nervous these days...And yet, still, there is optimism.  Who to believe?  The sky is falling or the sky is the bluest it's ever been!  How about the truth lying between these two extremes.  Certainly our economy continues to do well, our stock market volatile because of world markets, namely China.  Positive: growth is steady as the economy adds 215,000 jobs in July.  Negative: China seems to be slipping.  Positive: instead of seeing this as bad for housing, because of all the cash buyers from China in the last year could evaporate, think positive of all the money in China that will be looking for a safe harbor; exiting their markets and searching for places to park their cash.  Positive:  Housing is the number one need on the horizon, meaning we need to build, a lot.  Negative: trying to find enough workers.  Positive: If you already have a home and you wish to sell it, there is probably a ready and willing buyer or two or three, who would like a chance to buy.  Negative: August just finished the worst month for the stock market in years.  Positive: the Feds may now be unwilling to raise interest rates, which was a certainty two weeks ago.  If you want a sure bet, there is a savings account available with .05% interest available.  The real estate and stock markets may not be for you.  One of those markets just lost 3 trillion in one week on paper, and the other is up 5.3% year over year for the latest month available. (July 2015)  But let's remember some practicalities: 1) You have to live somewhere  2) Interest is deductible  3) there is a homeowner's tax deduction of $7,000 4) every time you make a mortgage payment you build equity  5)no one can make you move but you.  6) decorate any way you wish.  But perhaps the most interesting comment that can be made is that if you own your own home you will undoubtedly retire sooner and in better financial shape.  

NEW YORK TIMES EDITORIAL FOCUSES IN ON HOME OWNERSHIP AND WEALTH CREATION

They explain, "Homeownership long has been central to Americans' ability to amass wealth; even with the substantial decline in wealth after the housing bust, the net worth of homeowners over time has significantly outpaced that of renters, who tend as a group to accumulate little if any wealth." The Federal  Reserve chimed in with results from their own, "Survey of Consumer Finance." The Federal Reserve found that the average net worth of homeowners the last 2 years was $194,500 which was 36 times greater than the renters net worth of $5,400.  Indeed, the homeowner net worth is expected to climb this year to $218,000 and the renters to rise to $5,500.  The main reason cited for the discrepancy in net worth is the forced savings created by the month mortgage payment and that a portion goes to equity every single month.  That coupled with the tax savings of the monthly interest deduction, presents a compelling reason to buy a home if building wealth is one of your financial objectives.

WITH THAT IN MIND, THESE STATISTICS MAKE SENSE
BMO Harris Bank Home Buying Report issued the following statistics:  52% of Americans are likely to buy in the next 5 years.  Of those looking to buy, here is what they found: 1) 74% will use a Realtor - it's not finding a home that is the issue, it is navigating the contracts and disclosures and price negotiations.  2) 59% will look online  3) 37% will seek recommendations from family and friends  4) 78% plan to get preapproved for their mortgage first.  This is wise since that is one of the primary reasons one offer will win over the other is that financing is already obtained or fully approved over another buyer who has not done their due financing diligence, even if their offer is the better offer.  The Report also gave insight into those who had already bought a property:  1) 75% set a budge and 16% spent less and 13% spent more  2) 63% spent less than 6 months looking for their home  3) 8% bought without a plan to do so because a particular property caught their eye.

WHAT WERE THE ACTUAL NUMBERS?

For the month ending in July, the last complete month, according to CoreLogic, the median price rose to $615,000.  However, appreciation is off the red hot double digit growth of 2013 and 2014 and is a much more sustainable and healthy 5.3%.  The number of homes listed for sale as of August 13th was 7,167 and that was up from a month ago of 6,935. (MLS)  The median price per square footage also rose to $377.67, up $9.67 from July 2014.  Rents rose 3.6% and was the 59th consecutive month of year-over-year increases.  This is the key to buying and why it makes profound sense.  You buy a home now and get a 30 year fixed rate loan at 3.85% and in 20 years, in that same home, your payment is exactly the same.  No inflation!!  But if you had been renting all those 20 years at approximately 3% inflation... do the math, what you would be paying would be astronomical compared to what you're paying today.  It just doesn't make sense. Referring your family and friends, to help them buy a home is one of the best and truest acts of financial friendship.

REMEMBER THE DETAILS

When you are buying a home remember that the seller is paying commission to that broker.  The buyer traditionally and customarily does not pay commissions.  So it doesn't make sense to buy a home without representation.  Secondly, be prepared for closing costs, such as an entire year of homeowners insurance as a lender requirement.  Make sure you know how much money you will need in addition to your down payment.  Make sure you know all the lender guidelines on gift money.  Finally, make sure you get and pay for a home inspection so you have full disclosure from a third party on any prospective home.  Sellers' need also remember to get outside opinions on what needs to be done to a home before it hits the market.  Do too much and you give buyers free upgrades on improvements that can't be fully recouped at sale.  Don't do enough and you leave money on the table.  Next month we will discuss staging and why you do it.