Still renting? You must have a good reason. Although, we're not really sure what it is. With rents continuing to rise across the country, interest rates staying around historic levels, and new loans lowering down payment requirements, it just makes sense to take the leap to homeownership.
Analysts anticipate a slowdown for the economy in the latter half of 2017, with housing having less bearing on growth due to constraints in supply, according to Fannie Mae’s Economic & Strategic Research (ESR) Group’s recently released Economic and Housing Outlook for July 2017. The Outlook maintains the economy will grow 2.0 percent over the course of the year, but also projects a delayed key interest rate hike.
Foreign home-buying in the U.S. leaped 49 percent to $153 billion in the last year, a record high in the National Association of REALTORS® (NAR) Profile of International Activity in U.S. Residential Real Estate, recently released for 2017. The boost came as activity from Canada exploded to $19 billion, with buyers from China, India, Mexico and the UK also contributing considerable volume.
Falling mortgage rates and rising home values are a tasty combination for homeowners, but millions are not biting because of the hassle of a refinance.
BY JARED MARTIN
Regardless of what Congress does with tax reform, they must provide a tax incentive for renters to become homeowners. More than 100 years ago, Congress decided the United States of America should be a nation of homeowners.
To that end, they created a tax incentive. They understood the value of homeownership in creating and sustaining communities, promoting social stability, fostering educational opportunities, and building wealth. Now, as homeownership rates across the country decline and the middle class shrinks, some members of Congress are looking to nullify home ownership incentives.
If a tax on homeownership passes, America’s households will lose out on hundreds of thousands of dollars of net-worth, neighborhoods will be weakened, and we will continue to see the middle class decline.
Before it’s too late for us to have a say in the matter, let’s consider some of the realities about owning a home and why Congress should keep a tax incentive to encourage homeownership.
WE CAN’T ALLOW TAX REFORM TO BECOME A TAX ON HOMEOWNERSHIP.
Reality No. 1: Owning a home is one of the best ways to build long-term wealth, providing both equity accumulation and tax benefits over time. In 2013, the median net worth of homeowner families was $195,400, while the median net worth of renters was $5,400, according to the Federal Reserve. Minorities struggling to get on the housing ladder will also find themselves at a disadvantage, further widening the wealth gap.
Reality No. 2: The social benefits of homeownership can’t be ignored either. There’s no debating that homeownership strengthens communities, encourages higher civic participation, boosts children’s educational performance, lowers crime rates, and improves health-care outcomes. Moreover, homeowners bring more stability to neighborhoods because they tend to move less often.
Reality No. 3: Homeownership helps provide predictability. Individuals can enjoy steady and consistent housing costs thanks to the tax incentive that allows them to own a home. That's because a fixed-rate mortgage payment might not change for 15 to 30 years, while rents typically increase 2 to 3 percent a year.
Reality No. 4: The deduction of state and local taxes (such as property taxes) prevents double taxation. You as a taxpayer do not enjoy the use of money paid to state and local taxes. Therefore, the federal government allows you to deduct these from your federal income taxes. Eliminating this benefit will penalize California more than other states because of our high home prices and high tax rates.
Reality No. 5: It can be a home-purchasing catalyst that creates a favorable economic ripple effect. Home sales in this country generate more than 2.5 million private-sector jobs in an average year. For every two homes sold, one job is created. Any change that would make home buying less attractive will be detrimental to the housing industry and the nation’s economy.
Unless today’s lawmakers resist the temptation to change or eliminate the impact of homeownership tax incentives, the impact will be felt by tens of millions of people who own, or want to sell or buy a home. The potential ripple effect should not be underestimated. Since housing is widely regarded as a key economic driver, such actions could drive the country back into recession.
Not encouraging homeownership through the tax code and eliminating the property tax deduction is a de facto tax increase on homeowners and the middle class.
If the White House truly wants to help working-class citizens seeking the American Dream, then it is imperative to maintain a tax incentive for homeownership and protect Californians against double taxation.
We can’t allow tax reform to become a tax on homeownership.
Jared Martin is a Fresno Realtor and 2018 president-elect of the California Association of Realtors.
By LAURA HAVERTY
A home of your own could be within your reach.
It's spring, and some renters' thoughts may turn to home buying. Then reality hits: Between paying off student loans, paying rent, and keeping up with other bills, they haven't saved for a down payment.
Renters cite down payments as one of the biggest roadblocks to homeownership. So, if you're a low- to moderate-income home shopper in California, Florida, Rhode Island, Tennessee, or Kentucky, you'll want to pay close attention. These states (and a few others) have Hardest Hit Fund (HHF) money available from the U.S. Department of the Treasury, which helps eligible buyers with down payment assistance (DPA).
Each state DPA program has income, credit score, occupancy, property value, and location requirements. But they share a common goal: revitalizing hard-hit communities.
"Our goal is to stabilize the neighborhoods and housing markets in Tennessee that have not recovered as fast as other areas across the state," says Ralph M. Perrey, executive director of the Tennessee Housing Development Agency, which offers $15,000 in down payment assistance to draw home buyers to 55 ZIP codes across the state.
Housing agencies in 18 states and the District of Columbia have been administering HHF money since 2010. Participating states were chosen either because they struggled with unemployment rates at or above the national average, or they experienced home price declines greater than 20 percent since the housing market downturn.
In the beginning, programs focused on homeowners in some type of mortgage distress. "Now, to help these communities, we've developed programs for other issues we face," says Cecka Rose Green, communications director at Florida Housing Finance Corporation.
Florida, California, Oregon, and Michigan have made HHF available to seniors who can't pay property charges on their home equity conversion (reverse) mortgages. Illinois is now using HHF to help underwater homeowners refinance to more affordable loans. And several states have launched HHF DPA programs.
Florida's $188.4-million HHF DPA program has assisted 7,481 first-time borrowers across 11 targeted counties. Borrowers can request up to $15,000 for down payment, closing cost, and prepaid assistance toward a home purchase.
"With the housing market improving, helping people buy homes is strengthening demand in hard-hit areas, stabilizing home prices, and preventing future foreclosures," says Green.
"These agencies are being creative and resourceful in working with the Treasury to continue to serve their markets," adds Mark Spates, a Fannie Mae director. Fannie Mae is the leading purchaser of loans underwritten by state housing agencies.
When the money runs out
States have until the end of 2020 to spend HHF money - but how they allocate funds varies from program to program.
The Arizona Department of Housing has a $76-million Pathway to Purchase DPA program, which has helped more than 2,600 buyers in 17 targeted cities.
But on March 29, 2017 - approximately 12 months after launch - Pathway to Purchase ran out of money, and the agency will not refund it. However, buyers can still apply for DPA from the state's self-funded program, notes Dirk Swift, homeownership programs administrator for the Arizona Department of Housing.
California, Florida, Rhode Island, Tennessee, Kentucky, and a few other states still have HHF DPA money for renters hoping to buy - for now.
"We're not in a situation where we're about to run out of DPA funds," advises Green. "But they're going pretty fast."
If you plan to purchase in an HHF state or want to learn more, contact your state housing finance agency, or visit the Hardest Hit Fund website to learn about local opportunities.
Looking for more information about mortgages? Check out our Mortgage Learning Center.
The equity in your house is not necessarily how much it is worth but how much it is worth after subtracting the debt against the house. As home values rise, generally speaking so does your equity thus making your home a wonderful passive savings account. The attached graphic helps to illustrate how the equity can grow.