In a CNBC article, self-made millionaire David Bach explained that “the single biggest mistake millennials are making” is not purchasing a home because buying real estate is “an escalator to wealth.”
Bach went on to explain:
“If millennials don’t buy a home, their chances of actually having any wealth in this country are little to none. The average homeowner to this day is 38 times wealthier than a renter.”
In his bestselling book, “The Automatic Millionaire,” Bach does the math:
“As a renter, you can easily spend half a million dollars or more on rent over the years ($1,500 a month for 30 years comes to $540,000), and in the end wind up just where you started — owning nothing. Or you can buy a house and spend the same amount paying down a mortgage, and in the end wind up owning your own home free and clear!”
Bach is a self-made millionaire who has written nine consecutive New York Times bestsellers. His book, “The Automatic Millionaire,” spent 31 weeks on the New York Times bestseller list. He is one of the only business authors in history to have four books simultaneously on the New York Times, Wall Street Journal, BusinessWeekand USA Today bestseller lists.
He has been a contributor to NBC’s Today Show, appearing more than 100 times, as well as a regular on ABC, CBS, Fox, CNBC, CNN, Yahoo, The View, and PBS. He has also been profiled in many major publications, including the New York Times, BusinessWeek, USA Today, People, Reader’s Digest, Time, Financial Times,Washington Post, the Wall Street Journal, Working Woman, Glamour, Family Circle, Redbook, Huffington Post, Business Insider, Investors’ Business Daily, and Forbes.
Whenever a well-respected millionaire gives investment advice, people usually clamor to hear it. This millionaire gave simple advice – if you don’t yet live in your own home, go buy one.
Here are five reasons listing your home for sale this fall makes sense.
1. Demand Is Strong
The latest Buyer Traffic Report from the National Association of Realtors (NAR) shows that buyer demand remains very strong throughout the vast majority of the country. These buyers are ready, willing, and able to purchase… and are in the market right now! More often than not, multiple buyers are competing with each other to buy a home.
Take advantage of the buyer activity currently in the market.
2. There Is Less Competition Now
Housing inventory is still under the 6-month supply that is needed for a normal housing market.
This means that, in the majority of the country, there are not enough homes for sale to satisfy the number of buyers in the market. This is good news for homeowners who have gained equity as their home values have increased. However, additional inventory could be coming to the market soon.
Historically, the average number of years a homeowner stayed in their home was six, but that number has jumped to an average of almost nine years since 2008. There is a pent-up desire for many homeowners to move, as they were unable to sell over the last few years because of a negative equity situation. As home values continue to appreciate, more and more homeowners will be given the freedom to move.
The choices buyers have will continue to increase. Don’t wait until this other inventory comes to market before you decide to sell.
3. The Process Will Be Quicker
Today’s competitive environment has forced buyers to do all they can to stand out from the crowd, including getting pre-approved for their mortgage financing. This makes the entire selling process much faster and much simpler as buyers know exactly what they can afford before home shopping. According to Ellie Mae’s latest Origination Insights Report, the time to close a loan has dropped to 43 days, after seeing a 12-month high of 48 days in January.
4. There Will Never Be a Better Time to Move Up
If your next move will be into a premium or luxury home, now is the time to move-up! The inventory of homes for sale at these higher price ranges has forced these markets into a buyer’s market. This means that if you are planning on selling a starter or trade-up home, your home will sell quickly AND you’ll be able to find a premium home to call your own!
Prices are projected to appreciate by 5.0% over the next year according to CoreLogic. If you are moving to a higher-priced home, it will wind up costing you more in raw dollars (both in down payment and mortgage payment)if you wait.
5. It’s Time to Move on With Your Life
Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?
Only you know the answers to the questions above. You have the power to take control of the situation by putting your home on the market. Perhaps the time has come for you and your family to move on and start living the life you desire.
That is what is truly important.
The fact that residential home prices are increasing substantially in most regions of the country is music to the ears of homeowners. However, if you are in the process of selling your home, make sure you realize the major challenge a hot real estate market creates. Each house must be sold twice; once to a buyer and a second time to an appraiser who represents the bank that will grant the purchaser a mortgage to buy the home (unless it is an “all cash” purchase). In a real market with escalating prices, the second sale may be the more difficult. And a recent survey by Quicken Loans reveals that the gap between what a homeowner believes is the value of their home compared to an appraiser is widening.
This could lead to an increase in the percentage of real estate transactions being challenged by a ‘short’ appraisal (where the appraiser value is less than the contracted price of the home).
Whether you are a buyer or a seller, you must be prepared for this possibility as it may result in a renegotiation of the price of the home.
The results of Fannie Mae’s June 2015 National Housing Survey, were just released showing that more and more homeowners are warming up to the idea that now may be a great time to sell their home. The amount of respondents that stated that now is a good time to sell rose three percentage points to a survey high of 52%; which may translate to a healthier market as more homes are listed in the coming months. At the same time “the percentage of respondents who expect home rental prices to go up rose to 59% – a new survey high.” Doug Duncan, senior vice president and chief economist at Fannie Mae, gave this insight: “The expectation of higher rents is a natural outgrowth of increasing household formation by newly employed individuals putting upward pressure on rental rates.” There is a chance that those who believe rental prices will rise may consider renting their house rather than selling it at this time. However, if you have no desire to actually become an educated investor in this sector, you may be headed for more trouble than you were looking for. Are you ready to be a landlord? Before renting your home, you should answer the following questions to make sure this is the right course of action for you and your family.
Renting out residential real estate historically is a great investment. However, it is not without its challenges. Make sure you have decided to rent the house because you want to be an investor, not because you are hoping to get a few extra dollars by postponing a sale.