Real Estate Articles

REALTOR®: Study shows homeownership still a great way to build wealth

According to a Federal Reserve survey, homeownership declined in a span of three years from 67.3 percent of families owning a primary residence in 2010 to 65.2 percent in 2013. Yet the same study shows home owners are building more net worth than renters.

In the National Association of REALTORS® Economists' Outlook blog, NAR director of Housing Statistics Danielle Hale indicates information from the 2013 Federal Reserve Survey of Consumer Finances shows in the past 15 years, the net worth of the typical home owner has ranged between 31 and 46 times that of the net worth of the typical renter. The survey reveals the average home owner has a net worth of $174,500 compared to the average renter, who has $5,100 net worth. The median value of owners' homes was $170,000.

The Federal Reserve Board's Survey of Consumer Finances collects information every three years about family incomes, net worth, balance sheet components, credit use, and other financial outcomes. The 2013 survey provides a view of changes to U.S. family finances since the survey was conducted in 2010.

"As many home owners suffered and lost their homes during the Great Recession, home ownership has been less appealing as a financial investment, but it does pay to be a home owner in the long-term," says David Tonna, president of the Silicon Valley Association of REALTORS®. "Not only can homeownership build wealth over time, but homeownership strengthens communities, and has been shown to reduce crime, improve education, and increase community involvement."

For people with good jobs and strong credit, the low mortgage interest rates make now a good time to buy a home, but they need to be prepared, stresses Tonna.

Tonna shares the following tips with prospective home buyers:

• Start saving. Ideally, buyers should have 20 percent of the purchase price saved as a down payment. Closing costs average between two and seven percent of the home price.
• Be cautious about paying the maximum, because you will want some reserve to enhance the home or purchase furnishings.
• Decide what you can afford. Generally, buyers can afford a home equal in value to between two and three times their gross income.
• Calculate costs of homeownership (i.e. taxes, insurance, utilities, etc.).
• Assemble your credit report and history.
• Determine mortgage qualifications. Research and explore all loan options.
• Get preapproved for a loan, do not just get pre-qualified. Being pre-approved for a loan makes your offer more attractive to buyers.
• Select neighborhoods and remember to take into account schools, recreational facilities, area expansion plans, commute to and from work, and safety in the area.
• Contact a REALTOR® who can help guide you through the process.

"You want to be able to afford your house, be comfortable with your house payments, and be able to keep your house," said Tonna. "A REALTOR® can provide buyers with counsel, market data, strategies, and negotiating skills. A REALTOR® can provide the most accurate data and reliable expertise in the neighborhood you choose to live, and help you make the smartest decision about buying a home."

The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please email or call the SILVAR office at (408) 200-0100.

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