Homeownership still linked to wealth building

In good times and in bad, homeownership consistently maintains a strong link to the building of personal wealth for Americans. This is the conclusion reached by researchers at The Harvard Joint Center for Housing Studies, after revisiting their previous study from 2009.

 

The report citing the updated analysis, “upholds the bottom-line result from the earlier paper: that homeownership was associated with significant gains in household wealth, even when viewed across the tumultuous housing crisis period of 1999-2013.”

 

The authors reached identical conclusions from both generations of the report.  Namely:

  1. Even during market downturns with extremely volatile house prices, a majority of the home owners who were able to stay current on their mortgages, created substantial wealth for themselves in the process;
  2. Renters who bought homes and stayed current on their mortgages through the recession had some of the largest gains in wealth; and
  3. Renters who bought homes but weren’t able to maintain their payments, were no worse off financially than before they purchased a home.

Content of the updated report can be found at Update on Homeownership Wealth Trajectories Through the Housing Boom and Bust.

Authors of the report commented that, “Taken together, the study’s findings of both the remarkably and persistently low wealth levels of the typical renter and the potential for wealth accumulation when homeownership is maintained underscore the need for policies both to support sustained homeownership as well as to help renters find ways to build wealth outside of homeownership.”

To quote Yogi Berra, “It’s deja vu all over again.”

FSBO vs. Agent: What’s a homeowner to do?

When the real estate market gets this red-hot in favor of sellers, many homeowners begin to wonder why they should hire an agent to help them sell their home. After all, homes are flying off the shelf and practically selling themselves. Why not just do it yourself and save the commission?

It’s a fair and reasonable question. My response is, selling a home isn’t as simple as it looks. Where the purchase and sale of real estate is concerned, what you don’t know can really hurt you. Here’s how.

1) The key to getting top dollar for your property is market exposure, because competition is what drives up the price of your home. Like it or not, the Multiple Listing Service (MLS) is the most efficient and effective means of advertising the sale of your home. Agents pay (some would say, handsomely) to be members of the MLS in order to have this advantage. Non-members (i.e. the general public) are not able to list their property on the MLS. Granted, there are companies such as “MLS for Owners” that allow homeowners to use their license to list property, but that only solves one of the potential problems.

2) A typical Purchase and Sale Agreement (aka, sales contract) consists of approximately 25 pages of legal documents, detailing everything from contingencies to timelines to loan terms. “Time is of the essence” means exactly that. One missed deadline can void a sale.

3) Agents perform a myriad of essential tasks behind the scenes that can only be learned through study and experience. Even brokers with decades of experience will tell you that they learn something new with every transaction. A home owner may be fortunate enough to get a smooth, simple sale, but when something goes wrong, a professional really earns their money.

4) We live in a litigious society. If an unrepresented seller makes a mistake, the blowback can be much more costly than the commission.

Obviously, I’m biased, but I hope I have provided food for thought.