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A House is an Expense Not an Investment

18 Sep 2017

Posted by Joseph Coupal

HHHunt ApartmentsThere has been a lot of conversation lately debating the value of housing as an investment. A case can be made that treating a house as an investment is the biggest mistake most people make in personal finance. That's why many people own houses they can't afford, and don't have sufficient financial assets to support themselves in retirement.

First and foremost, housing is a living expense. We have to pay some amount of money every month to live somewhere. Now, we will either pay it through renting a place or buying a place. But the amount spent on housing is a lifestyle expense. It's just like transportation. You have basic transportation costs to get around in life. You can either lease or buy a car, but the car is an expense, not an investment. And buying a $100,000 Mercedes isn't an investment; it's a lifestyle choice because you could have driven a used Kia or even taken the bus.

You might be thinking, "well a house is a lot different than a car, and that's not a valid comparison." Ah, but it is, because both assets are depreciating.

The house itself, the physical structure that you built or bought, is a depreciating asset, just like a car. It will age and fall apart over time unless you are constantly pumping money into it for maintenance. And the costs of maintenance and repair are expenses. Even when you pay off the mortgage, you will have costs to maintain, insure, and pay taxes on the value of that home. So the bigger the physical house, the more it will cost you to keep it. That's a fact.

By now you might be thinking, "but houses do go up in value, so how do you explain that?" Yes, they can as long as the region where you live is growing economically and you continue to maintain the home. If your region is growing, housing over the long term will roughly increase in price along with wage growth.

  • By the way, if housing prices grew faster than wages over the long term, then no one could eventually afford a house as the annual mortgage payments would be more than the average worker's total annual salary.

In most parts of the country, that means a return from housing just slightly above inflation. That's not bad, but when you offset those price increases with the costs of maintaining the home, you usually end up putting more money into the house than you get out of it. That's not much of an investment.

OK, if houses depreciate and cost money to keep up, how come some people have made lots of money on their houses? Here's the answer: what really goes up in value is the land, not the house you built. Some people get lucky with houses and end up owning homes in parts of the country that experience big increases in land values. That's why the three most important things in real estate are location, location, location. It's the land that has the potential long term value, not the physical house.

Bottom line. Houses are primarily a lifestyle expense. Necessary, but still an expense. Buy only what you can comfortably afford, and leave plenty of room in the budget to invest in financial assets that can support you in retirement.

For more information on apartments, contact HHHunt.

#HowYouLive

CBS News

Millennials Are Renting For Different Reasons

12 Sep 2017

Posted by Joseph Coupal

HHHunt ApartmentsMillennials aren't buying homes at the same rate as previous generations, and homeownership rates for those under 35 have steadily declined since the early 2000s.

One reason for this shift: Young people today have different priorities.

According to a recent survey, 47 percent of young people between the ages of 18 and 34 would rather spend their money on traveling than buying a house. This holds true to an opinion millennial consumers have expressed for years: Experiences matter more than things.

A 2014 Eventbrite poll found that 78 percent of millennials would choose to spend money on a desirable event over a desirable purchase and 55 percent said that they're spending more on experiences than they ever have.

Millennials aren't spending our money on cars, TVs and watches. They are renting scooters and touring Vietnam, rocking out at music festivals, or hiking Machu Picchu.

Young people also prioritize small luxuries, such as restaurant meals, daily Starbucks runs and avocado toast. Forty-seven percent of respondents ages 18 to 34 said they'd prefer to rent over buy if it meant they could still afford such indulgences.

But although finances alone aren't the only thing holding young people back from home ownership, cost remains a major factor in whether or not they choose to buy.

Home prices keep rising while wages have remained largely flat. So, recent data from Apartment List shows, although 80 percent of millennials would like to purchase real estate at some point, very few young people are in a good position to buy.

While an indulgent vacation may set a millennial back a few thousand dollars, the cost of owning a house is vastly higher. A 20 percent down payment on a $200,000 home would cost $40,000 alone, before closing costs, maintenance and other the other expensive elements of home ownership even come into play.

For more information on apartments, contact HHHunt.

#HowYouLive

cnbc.com

Millennials Should Rent And Not Buy Their Home

06 Sep 2017

Posted by Joseph Coupal

HHHunt ApartmentsHere is some insight into the home ownership issues Millennials face.

When one pulls out the calculator, and projects home price appreciation - home purchase makes sense. Home buying is a forced savings plan as part of the mortgage payments increase home equity. This works IF you have the coins to plop down the down payment - closing costs - and the home price appreciation occurs as expected. And going into retirement, social security goes much farther if you do not rent and own your home outright - especially if you have owned that home for a period of time and have relatively low tax rate.

Home ownership is a noose around your neck if one is required to move. Homes are close the hardest asset to sell. For Millennials, many are faced with a changing job market. How many times in their lifetime will Millennials change jobs because of robotics? And according to LinkedIn "Millennials are job-hopping more than previous generations" - 4 companies in 10 years after graduation. Is it smart to make a long term commitment (say home ownership) if your job changes requires moving to a new location?

Additionally, what goes UNSAID is the hidden costs of home ownership. From gobankingrates.com:

Buying a home is expensive - in fact, the average American home costs more than $360,000, according to the U.S. Census Bureau. The cost of owning a home doesn’t end with your mortgage loan, however; you must add maintenance into your budget, which might cost you an additional $1,204 a month, or $14,448 annually. Those monthly costs can add up quickly - it might help you decide if buying a home is the right financial move.

For more information on renting apartments, contact HHHunt.

nasdaq.com

Renting a Home is at a 50-Year High

29 Aug 2017

Posted by Joseph Coupal

Abberly West Ashley, Charleston, SCDue to lingering effects of the 2008 housing crisis, renting has become a widely popular option for those hoping to combine an independent lifestyle with affordability. In fact, more Americans are actually renting a home than at any point since at least 1965.

While the number of U.S. households jumped 7.6 million from 2006 to 2016, the amount of homes owned rather than rented actually remained flat. In turn, the amount of households choosing to rent rose from 31.2 percent in 2006 to 36.6 percent in 2016. This nearly reaches the all-time high set in 1965 of exactly 37 percent.

While renting has historically been more common for nonwhites and young adults, the trend has been increasing all across the board. More whites and middle aged adults are renting than ever before, arguably due to financial reasons more than anything. Many Americans — both renters and owners alike — believe it’s currently a seller’s market and therefore not a great time to make a purchase. The recent nationwide spike in median home values paired with rising competition doesn’t help justify buying a home either.

While rental rates have increased among many groups, young adults — younger than 35— continue to rent more than any other age group. Millennials often want to leave their childhood home, but they don’t necessarily have the means to buy their own place just yet. In fact, many of them don’t want to at all — recent trends such as the decline of the McMansion and the surge of millennials living in cities indicate Generation Y finds other factors more important than square footage.

For more information on renting apartments, contact HHHunt.

#HowYouLive

chicagoagentmagazine.com

Even Though Rates Are Low, Houses Are Not Affordable

22 Aug 2017

Posted by Joseph Coupal

HHHunt ApartmentsThis past week we were treated to slowing existing home sales with the reason being "Closings were down in most of the country last month because interested buyers are being tripped up by supply that remains stuck at a meager level and price growth that's straining their budget". Yes, homes for sale inventories are historically low, but the real issue is that home price growth and property taxes (based on your purchase price) makes buying a home unaffordable.

Even with historically low mortgage rates, the mortgage is only one component of home buying. Owners must:

  • pay closing costs
  • buy insurance
  • pay property taxes
  • maintain property (usually owners also modify home to meet their desires - renters do not)

Property taxes are a big deal. In most parts of the country, the longer you stay in your home - the property taxes remain moderate. But go out and buy a new home, and you will get a surprise with the increase in property taxes (even if you buy your new home for the same price you sold your previous one).

For first time buyers, not only are they surprised with the insurance and property taxes cost - but now they are faced with the time and expense of maintaining the property.

In 1972 Although interest rates were high, the home prices were about 2 times gross income. Closing costs were around $99. The median family today has income around $50,000 which would put the purchase price a little over $100,000 if the 1972 conditions could be teleported to 2017. Do yah think the home ownership rate would skyrocket if $100,000 homes were available in 2017?

The home price / income ratio constrains more than half of the population from home ownership. The Federal Reserve’s Board of Governors recently released a report showing that, if confronted with an unanticipated $400 expense, nearly half (44 percent) of Americans would have to sell something, borrow or simply not pay at all. There goes the possibility of down payment and closing costs to buy a home.

What happened since 1972? The cost of a home has gone up 10 times. Construction material costs have gone up 5 times - but so has family income gone up 5 times. Construction labor has gone up 5 times. Property taxes have gone up 5 times. That leaves the cost of land and development as the bogeyman.

Home ownership is likely now out of reach for over half the population. And many who could afford housing do not want the headaches or the expense.

For more information on apartments, contact HHHunt.

#HowYouLive

econintersect.com

The Unexpected Costs of Owning a Home

15 Aug 2017

Posted by Joseph Coupal

HHHunt Apartments

The expense isn't limited to the mortgage payment

When evaluating whether it makes sense to buy a house or rent your home, you need to look at all the expenses that go into both choices.

When renting, the monthly rent check you write each month is pretty much the extent of your cost. It's different when you own a home.

Real estate marketplace Zillow has broken down the costs and estimates homeowners spend an average of $9,080 a year in extra expenses that go into owning and maintaining a home. However, a large portion of that goes into taxes and insurance, which are usually paid as part of the monthly mortgage payment.

The analysis shows homeowners pay $6,059 a year to cover taxes, insurance, and utilities. Most renters, however, also pay utilities separate from the monthly rent.

That leaves us with the money homeowners spend each year to maintain and improve their homes. The most common expenses, according to Zillow, are carpet cleaning, yard work, gutter cleaning, HVAC maintenance, house cleaning and pressure washing.

Regional labor costs

How much all of that costs will depend on labor costs where you live. Zillow found Seattle homeowners might have to pay as much as $4,052 a year on average to complete those six projects, but homeowners in San Antonio pay just $1,962 on average.

Determining how much a home will ultimately cost you each year and what you can afford is one of the most challenging aspects of home buying, especially for first-time buyers.

That's why the extra costs need to be factored into any homebuying decision. It's one thing to have enough cash to make the down payment, it's another to keep up and maintain the property.

And unless you are a skilled do-it-yourselfer, many home improvements are best left to professionals. Unless they are done properly, and to local building codes, they may not add the value to your home that you think they will.

For more information on apartments, contact HHHunt.

#HowYouLive

consumeraffairs.com

Determining if Downsizing is for You

08 Aug 2017

Posted by Joseph Coupal

HHHunt ApartmentsMany retirees downsize their homes, but this decision requires careful consideration of a variety of factors.

As men and women retire or approach retirement age, many opt to downsize their homes. Such a decision can save older adults substantial amounts of money while also liberating them from the hassle of maintaining large homes they no longer need.

Downsizing to apartments is a significant step, one that homeowners should give ample consideration before making their final decisions. The following are a handful of tips to help homeowners determine if downsizing to smaller homes is the right move.

  • Get a grip on the real estate market. Downsizing is not solely about money, but it’s important that homeowners consider the real estate market before putting their homes up for sale.

Speak with a local realtor or your financial advisor about the current state of your real estate market.

Downsizing can help homeowners save money on utilities, taxes and mortgage payments, but those savings may be negated if you sell your house in a buyer’s market instead of a seller’s market. Luckily, right now is a seller's market.

  • Take inventory of what’s in your house. Empty nesters often find that their homes are still filled with their children’s possessions, even long after those children have entered adulthood and left home. If the storage in your home is dominated by items that belong to your children and not you, then downsizing might be right for you.

Tell your children you are thinking of downsizing and invite them over to pick through any items still in your home.

Once they have done so and taken what they want, you can host a yard sale, ultimately donating or discarding what you cannot sell. Once all of the items are gone, you may realize that moving into a smaller place is the financially prudent decision.

  • Examine your own items as well. Your children’s items are likely not the only items taking up space in your home.

Take inventory of your own possessions as well, making note of items you can live without and those you want to keep.

If the list of items you can live without doesn't really bother you, then you probably won’t have a problem moving into an apartment.

If you aren’t quite ready to say goodbye to many of your possessions, then you might benefit from staying put for a little while longer.

  • Consider your retirement lifestyle. If you have already retired or on the verge of retirement and plan to spend lots of time traveling, then downsizing to an apartment may free up money you can spend on trips.

And if you really do see yourself as a silver-haired jet-setter, then you likely won’t miss your current home because you won’t be home frequently enough to enjoy it.

For more information on apartments, contact HHHunt.

#HowYouLive

thechronicleherald.ca

Should Millennials Rent or Own

01 Aug 2017

Posted by Joseph Coupal

HHHunt ApartmentsThere are many great debates in American pop culture.

Tupac or Biggie? Boyz II Men or Dru Hill? LeBron or Jordan? Mayonnaise or Miracle Whip?

One of the most intriguing debates finding traction in the world of Millennials and finance is the debate of whether to buy a home or to continue renting.

The Great Recession

Upon my graduating from Syracuse University in 2010, I was welcomed into the working world during the heart of The Great Recession. Caused in large part due to a bubble in home values and irresponsible subprime loans, The Great Recession left a scar on the hearts and minds of Millennials over what it means to own a home.

Seeing the incredible loss of value in homes during that period and shouldering a collective $1.4 trillion dollars in student loan debt, many millennials are asking whether it’s responsible to sign-up for an immovable asset and 30-year mortgage tied to owning a home.

A Case for Renting

The Millennial generation is the “own nothing” generation. You can rent a car from the curb nearest you. You can hail a taxi using an app and get a ride to brunch in a car you do not own. I’ve heard there’s a website that allows you to rent tools from nearby neighbors. Even companies founded in more recent years are making strides to own less to reduce or eliminate overhead.

A shift has happened wherein Millennials are considerate of the fact that ownership implies liability, and liability often means added costs.

Renting an apartment or home offers you the benefit of not being responsible for breakdowns or repairs. Renting provides a fixed monthly cost to factor into your monthly budget that does not change based on repairs or failure of appliances. For many, this lack of long-term responsibility presents peace-of-mind in not having to be concerned about the long-term welfare of your living space. It also absolves you from the imperative of maintaining your living space for the sake of keeping and increasing its value.

For more information on apartments, contact HHHunt.

#HowYouLive

Excerpts: blavity.com

How to Decide Whether to Rent or Buy Your Home

26 Jul 2017

Posted by Joseph Coupal

HHHunt ApartmentHomeownership is commonly considered a sign of success, but in some cases, it can actually work against your financial goals.

While buying and renting can both be good options under the right circumstances, people underestimate the hassle of owning and the benefits of renting because they are hardwired to do so.

Let's face it: most of us have a deep-rooted feeling that homeownership equals success and buying equals progress. Renting, on the other hand, is often seen as a form of failure—or even "settling." If you can't afford to buy, you just rent because you need a place to live, right?

This line of thinking is dangerous.

Before you commit to buying, it's important to note why you're doing it in the first place. If you're considering a home purchase to appear successful, you're setting yourself up for failure. If you're shopping for a home because you feel like it's a natural next step, you're making a mistake.

The Case for Renting

Renting may not feel like progress, but that doesn't mean it's not the right move for you. The fact is, renting comes with a ton of huge benefits, including:

1. Flexibility. 

Maybe you prefer to move around, seeing new neighborhoods and cities. No matter what, it's hard to put a dollar value on that experience and enjoyment. In addition, if you anticipate a career or job change, renting might suit you better, as buying a home can hinder your flexibility to pick up and move.

2. Avoiding homeownership costs. 

Homeowners are painfully familiar with unforeseen and often hefty costs such as furnishing, decorating, leaky pipes, landscaping, general maintenance—you name it. As a tenant, you enjoy the perks of your home without the worrisome financial burden.

3. Liquidity.

Generally, you can't turn a house into cash overnight. Many people invest their life savings into a home, putting the bulk of their net worth into an illiquid asset. Risk comes with tying up a large portion of your wealth in such an asset. Renting allows you flexibility and other investment options.

4. Building credit. 

As consumers, we need a healthy credit score for pretty much everything we do, from getting a new cell phone plan to buying a car. While renting doesn't boost your credit rating like owning a home might, creating a history of on-time rental payments can, in some cases, help build your credit to qualify for a mortgage down the road. This history begins when (and if) your landlord reports your payment data to credit agencies. Third-party services can help you report this information on your behalf.

For more information on apartments, contact HHHunt.

#HowYouLive

Kiplinger

Is it Time to Sell and Start Renting?

18 Jul 2017

Posted by Joseph Coupal

HHHunt Apartments

For many reasons, a lot of baby boomers have been delaying retirement. One reason is that they have been unable to sell their homes. They've been trapped in our old houses, in their high-tax communities, handcuffed to jobs by a lofty cost of living. They couldn't afford to retire until they could move to a less expensive home.

But now the real estate market is improving. The number of existing homes sold is up more than 8% from a year ago, and average prices have climbed 12% since this time last year.

Now the question is: If you can finally sell your home and move to a retirement destination should you rent your new place, or should you buy again? Let's remember that despite the lousy real estate market of the recent past, most boomers have made a lot of money owning their own homes over the past 30 years. For most of their lives – and their parents' lives– owning a home was the American dream.

The rule of thumb was that it was better to own than to rent, as long as you planned to stay in your house for at least five years.

But that was then. What about now? What we've all learned since 2006 is that owning a home can be an albatross as well as an opportunity. Many people now seem more interested in mobility than stability. You can't retire and you can't take that new job if you can't sell your house. And maybe you just no longer want the responsibility of taking care of a lawn and doing maintenance on the roof and the plumbing and the heating system.

Many of us know – and are a little jealous of – a friend or relative who was renting an apartment or a condo and was able to take a new job or jump on an early retirement package, then wave goodbye and start the new life they wanted.

Now that homeowners have the chance to move, do you really want to be saddled with another place you may not be able to sell?

Certainly, if you're experimenting with your retirement, shopping for a new place to live, you should not buy a place right away. Remember, buying and selling a house costs a lot of money – not just the down payment, but the mortgage, the lawyer, the insurance and taxes.

If you're not sure, rent for a year or two.

Above all, the choice of whether to rent or buy is a lifestyle decision. What kind of home and neighborhood you want to live in, whether you want to feel like a part of the community and how long you are you going to stay there.

For more information on renting, contact HHHunt.

Source: US News


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