During the housing market crash, Gen X homeowners lost more wealth than other generations. However, things are changing now! A strong economy, increasing home prices, and the recovery of the housing market are helping this generation to regain their lost wealth.
“Their fortunes have rebounded more than those of other generations during the post-recession economic expansion and as home and stock prices have risen. Since 2010, the median net worth of Gen X households has risen 115%. In fact, in 2016, the most recent year with available data, the net worth of a typical Gen X household had surpassed what it was in 2007 ($84,200 vs. $63,400)”.
The same report also mentioned,
“15% of Gen X’s homeowners were ‘underwater’ on their homes in 2010 (meaning they owed more than they owned). By 2016 only 3% were underwater.”
As a result of homes regaining market value and their increasing net worth, many Gen Xers are presented with the opportunity of selling their current home in order to move up to the house they always dreamed of!
A lot is happening in the world, and it’s having a direct impact on the housing market. The reality is this: some of it is positive and some of it may be negative. Some we just don’t know yet.
The following three areas of the housing market are critical to understand: interest rates, building materials, and the outlook for an economic slowdown.
1. Interest Rates
One of the most important things to consider when buying a home is the interest rate you will be charged to borrow the money. In our recent post we posed the question, “Are Low Interest Rates Here To Stay?” The latest information from Freddie Mac makes it appear they are. We are currently at a 21-month low in interest rates.
2. Building Materials
Talk of tariffs could also affect the housing market. According to a recent article, the National Association of Home Builders reports that as much as $10 billion in goods imported from China are used in homebuilding. Depending on the outcome of the tariff and trade discussions between several countries, there could be as much as a 25% boost in the cost of building materials.
3. Economic Slowdown
In a prior blog post on this topic, we began the year with many economic leaders thinking we could expect a recession in late 2019 or early 2020. As spring approached, we reported that economists had started to push that projection past 2020. Now, three leading surveys indicate that it may begin in the next eighteen months.
We are in a strong housing market. Wages are increasing, home prices are appreciating, and mortgage rates are the lowest they have been in 21 months. Whether you are thinking of buying or selling, it’s a great time to be in the market.
In a real estate market where home prices are rising, many have begun to reexamine the idea of buying a home, choosing instead, to rent for a while. But often, there is a dilemma: should you keep paying rent, knowing that rent is rising too, or should you lock in your housing cost and buy a home?
Let’s look at both scenarios and analyze the pros and cons of each:
With the housing market crash in 2008, many homeowners lost their homes and became renters. According to Iproperty Management, “the number of households renting their home … rose from 31.2% of households in 2006 to 36.6% in 2016”.
Some choose to rent because it is more convenient for their lifestyle. Those whose job requires frequent moves need the flexibility that a 6-12 month lease agreement gives them so they can move to their next assignment!
Many renters believe that renting is cheaper because they do not have to pay for maintenance and repairs. (Not true! Landlords work those expenses into your rent and other fees). Another reason many rent is that they feel like they cannot afford the down payment and closing costs required to buy a house, due to their inability to save much after paying their monthly expenses.
That can be true! Nearly 1 in 4 renters spend at least half their household income on rent. In 2017 the “severely” burdened renters’ rate was 24.7% with 24.9% reporting they were “moderately” burdened.
Renting also brings some financial disadvantages. Homeowners can take advantage of tax deductions that let them claim their property taxes and mortgage interest. Additionally, there is a big risk that your rent will go up every time you renew your lease, as we know the median asking rent has been increased steadily since 1988!One of the major challenges with renting is that you don’t have a space to call your own. When you rent, you are paying your landlord’s mortgage, and therefore they are the beneficiaries of the equity gained from paying that mortgage.
Now let’s explore the other side: Homeownership
In the past, we have mentioned the many financial and non-financial benefits of becoming a homeowner. So, let’s just focus on the one big difference between renting and owning, the ability to lock in your housing cost!
Assuming you will have a fixed-rate mortgage, your costs are predictable! You will know exactly what your mortgage payment will be for the next 15-30 years. The homeownership rate in 2018 was 64.4%, and has been on the rise. Those households locked in their housing cost rather than wait for their landlord to raise their rent again!
What are the disadvantages of owning a home? Well, it is a long-term financial commitment! It is not easy to pack quickly and move. You will need time and good planning to do it in a short amount of time.
Unless you have a homeowner’s association (HOA) (and you pay an HOA fee) or a home warranty, you will be responsible for maintenance and taking care of the home. This may range anywhere from regular landscaping to major repairs.
Like everything in life, there are pros and cons. What is better for you depends on your situation! If you are interested in becoming a homeowner and want to discuss the pros and cons, let’s get together to help you review your current situation and answer any questions you may have!
If you are a “baby boomer” (born between 1946 and 1964), you may be thinking about selling your current home. Your children may have finally moved out. Your large, four-bedroom house with three bathrooms no longer fits the bill. Taxes are too high. Utilities are too expensive. Cleaning and repair are too difficult. You may be ready to move into a home that better fits your current lifestyle. Many fellow boomers have already made the move you may be considering.
The National Association of Realtors recently released their 2019 Home Buyer and Seller Generational Report. The report revealed many interesting tidbits about both categories of baby boomers: younger boomers (ages 54 to 63) and older boomers (64 to72). Here are a few of the more interesting topics.
Percentage of Buyers who Looked Online First
All Buyers: 44%
Younger Boomers: 46%
Older Boomers: 44%
Where Boomers Found the Home They Purchased
The two major ways buyers found the home they purchased:
All buyers: 50% on the internet, 28% through a real estate agent
Younger Boomers: 46% on the internet, 33% through a real estate agent
Older Boomers: 36% on the internet, 35% through a real estate agent
Distance Seller Moved
The distance between the home they purchased and the home they recently sold was much greater for boomers than the average seller.
All sellers: 20 miles
Younger Boomers: 27 miles
Older Boomers: 50 miles
Tenure in Previous Home of Seller
The percentage of older boomers who lived in their previous home for more than 20 years was almost twice the amount of the average seller.
All sellers: 16%
Younger Boomers: 20%
Older Boomers: 31%
Primary Reason to Sell their Previous Home
Want to move closer to friends or family
Home too large
View of Homeownership as a Financial Investment
83% of Younger Boomers see homeownership as a good investment
82% of Older Boomers see homeownership as a good investment
If you are a boomer and thinking about selling, now might be the time to contact an agent to help determine your options.