Understanding the Benefits of Owning Your First Home
KCM • October 21, 2023
Understanding the Benefits of Owning Your First Home
Are you considering buying your first home? If so, it can be helpful to know what led other people to make that decision. According to a recent survey of first-time homebuyers by PulteGroup:
“When asked why they purchased their first home recently, the answer was simple: because they wanted to. Either the desire to stop renting or recognition that homeownership is a smart financial investment was the main motivator for 72% of respondents.”
While that survey looked specifically at first-time homebuyers buying newly built homes, the same sentiment is true for just about anyone buying their first home. Here’s a bit more information to help you think about those two benefits of homeownership to see if they’re a key factor for you too.
When You Buy a Home, You Have More Stability than When You Rent
You might want to stop renting because rents keep going up. If you’re a renter, that means there’s a chance your payment will increase each time you sign a new rental agreement or renew your current one.
On the other hand, when you buy your home with a fixed-rate mortgage, your monthly housing payment is predictable over the length of that loan. This stability can give you a peace of mind that renting just can’t provide. Jeff Ostrowski, real estate journalist, breaks it down:
“With a fixed-rate mortgage, your monthly principal and interest payment is set for as long as you keep the loan. Sign a rental lease, however, and you could see your rent rise the following year, the year after that and so on.”
When You Buy a Home, You Grow Your Wealth as Home Values Climb
Beyond that, owning a home can also be a great long-term investment. While renting may be the more affordable option right now, it doesn’t provide an avenue for you to grow your wealth over time. Mark Fleming, Chief Economist at First American, explains that’s an important distinction to consider:
“Given current dynamics, more young households may choose to rent in the near term as the cost to own, excluding house price appreciation, has unequivocally increased. Yet, accounting for house price appreciation in that cost of homeownership, whether to rent or buy will depend on where, and if, a home is likely to cost more or less in the near future.”
Basically, renting doesn’t allow you to build equity. In contrast, homeownership can help you grow your net worth as your home’s value appreciates. That’s a significant perk you can’t get if you keep renting.
When you take that into account, it may make better financial sense to buy. Most experts project home prices will continue to appreciate over the next few years at a pace that’s more normal for the market. That means when you buy a home, not only are you investing in a place to live, but you’re also investing in your financial future.
Bottom Line
If you're ready, it can be a smart move to buy your first home instead of renting. Let’s connect so you can stabilize your housing payment and start building wealth for your future.
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Why Home Prices Aren’t Actually Flat If you’ve been following real estate news lately, you’ve probably seen headlines saying home prices are flat. And at first glance, that sounds simple enough. But here’s the thing. The reality isn’t quite that straightforward. In most places, prices aren’t flat at all. What the Data Really Shows While we’ve definitely seen prices moderate from the rapid and unsustainable climb in 2020-2022, how much they've changed is going to be different everywhere. If you look at data from ResiClub and Zillow for the 50 largest metros, this becomes very clear. The real story is split right down the middle. Half of the metros are still seeing prices inch higher. The other half? Prices are coming down slightly (see graph below). The big takeaway here is “flat” doesn’t mean prices are holding steady everywhere. What the numbers actually show is how much price trends are going to vary depending on where you are. One factor that’s driving the divide? Inventory. The Joint Center for Housing Studies (JCHS) of Harvard University explains : “ . . . price trends are beginning to diverge in markets across the country. Prices are declining in a growing number of markets where inventories have soared while they continue to climb in markets where for-sale inventories remain tight .” When you average those very different trends together, you get a number that looks like it’s flat. But it doesn’t give you the real story and it’s not what most markets are feeling today. You deserve more than that. And just in case you're really focusing on the declines, remember those are primarily places where prices rose too much, too fast just a few years ago. Prices went up roughly 50% nationally over the past 5 years, and even more than that in some of the markets that are experiencing a bigger correction today. So, a modest drop in some local pockets still puts most of those homeowners ahead when it comes to the overall value of their home. And based on the fundamentals of today’s housing market, experts are not projecting a national decline going forward. So, what's actually important for you to know? If You’re Buying... You need to know what's happening in your area because that’s going to influence everything from how quickly you need to make an offer to how much negotiating power you’ll have once you do. In a market where prices are still inching up , waiting around could mean paying more down the line. In a market where they’re easing , you may be able to ask for things like repairs or closing cost help to sweeten the deal. The bottom line? Knowing your local trend puts you in the driver’s seat. If You’re Selling... You’ll want to be aware of local trends, so you’ll know how to price your house and how much you can expect to negotiate. In a market where prices are still rising , you may not need to make many compromises to get your home sold. But if you’re in a market where prices are coming down , setting the right price from the start and being willing to negotiate becomes much more important. The big action item for homeowners? Sellers need to have an agent’s local perspective if they want to avoid making the wrong call on pricing – and homes that are priced right are definitely selling. The Real Story Is Local The national averages can point to broad trends, and that's helpful context. But sometimes you’re going to need a local point of view because what’s happening in your zip code could look different. As Anthony Smith, Senior Economist at Realtor.com, article puts it: “While national prices continued to climb, local market conditions have become increasingly fragmented… This regional divide is expected to continue influencing price dynamics and sales activity as the fall season gets underway. ” That’s why the smartest move, whether you’re buying or selling, is to lean on a local agent who’s an expert on your market. They’ll have the data and the experience to tell you whether prices in your area are holding steady, moving up, or softening a bit – and how that could impact your move. Bottom Line Headlines calling home prices flat may be grabbing attention, but they’re not giving you the full picture. Has anyone taken the time to walk you through what we’re seeing right here, right now? If you want the real story about what prices are doing in our market, let’s connect.
What Buyers Say They Need Most (And How the Market’s Responding) A recent survey from Bank of America asked would-be homebuyers what would help them feel better about making a move, and it’s no surprise the answers have a clear theme. They want affordability to improve, specifically prices and rates (see below): Here’s the good news. While the broader economy may still feel uncertain, there are signs the housing market is showing some changes in both of those areas. Let’s break it down so you know what you’re working with. Prices Are Moderating Over the past few years, home prices climbed fast, sometimes so fast it left many buyers feeling shut out. But today, that pace has slowed down. For comparison, from 2020 to 2021, prices rose by 20% in a 12-month period. Now? Nationally, experts are projecting single-digit increases this year – a much more normal pace. That's a sharp contrast to the rapid growth we saw just a few short years ago. Just remember, price trends are going to vary by area. In some markets, prices will continue to rise while others will experience slight declines . Prices aren’t crashing, but they are moderating. For buyers, the slowdown makes buying a home a bit less intimidating. It’s easier to plan your budget when home values are moving at a much slower pace. Mortgage Rates Are Easing At the same time, rates have come down from their recent highs. And that’s taken some pressure off would-be homebuyers. As Lisa Sturtevant, Chief Economist at Bright MLS, says: “Slower price growth coupled with a slight drop in mortgage rates will improve affordability and create a window for some buyers to get into the market. ” Even a small drop in mortgage rates can mean a big difference in what you pay each month in your future mortgage payment. Just remember, while rates have come down a bit lately, they’re going to experience some volatility. So don’t get too caught up in the ups and downs. The overall trend in the year ahead is that rates are expected to stay in the low to mid-6s – which is a lot better than where they were just a few short months ago. They may even drop further, depending on where the economy goes from here. Why This Matters Confidence in the economy may be low, but the housing market is showing signs of adjustment. Prices are moderating, and rates have come down from their highs. For you, that may not solve affordability challenges altogether, but it does mean conditions look a little different than they did earlier this year. And those shifts could help you re-engage as we move into next year. Bottom Line Both of the top concerns for buyers are seeing some movement. Prices are moderating. Rates are easing. And both trends could stick around going into 2026. If you’re considering a move, let’s connect walk you through what’s happening in our area – and what it means for your plans.
Closing Costs Unpacked: State-by-State Breakdowns for Today’s Buyers If you’re planning to buy a home this year, there’s one expense you can’t afford to overlook: closing costs . Almost every buyer knows they exist, but not that many know exactly what they cover, or how different they can be based on where you're buying. So, let’s break them down. What Are Closing Costs? Your closing costs are the additional fees and payments you make when finalizing your home purchase. Every buyer has them. According to Freddie Mac, they typically include things like homeowner insurance and title insurance, as well as various fees for your: Loan application Credit report Loan origination Home appraisal Home inspection Property survey Attorney National vs. Local: Why the Numbers Look So Different When you search for information about closing costs online, you’ll often see a national range, usually 2% to 5% of the home’s purchase price. While that’s a useful starting point if you’re working on your homebuying budget, it doesn’t tell the whole story. In reality, your closing costs will also vary based on: Taxes and fees where you live (like transfer taxes and recording fees) Service costs for things like title and attorney work in your local area While the home price is obviously going to matter, state laws, tax rates, and even the going costs for title and attorney services can change what you expect to pay. That’s why it's important to talk to the pros ahead of time so you know what to budget for. It can put you in control before you even start shopping. To give you a rough ballpark, here’s a state-by-state look at typical closing costs right now based on those factors for the median-priced home in each state (see map below): As the map shows, in some states, typical closing costs are just roughly $1-3K. In a few places, they can be closer to $10-15K. That’s a big swing, especially if you’re buying your first home. And that’s why knowing what to expect matters. If you want a real number to help with your budget, your best bet is to talk to a local agent and a lender. They can run the math for your price range, loan type, and exact location. And just in case you’re looking at your state’s number and wondering if there’s any way to trim that bill, NerdWallet shares a few strategies that can help: Negotiate with the seller . Ask for concessions like a credit toward your closing costs. Shop around for homeowner’s insurance . Compare coverage and rates before you commit. Check for assistance programs . Some states, professions, and neighborhoods offer help. Your agent and lender can point you to what’s available locally. Bottom Line Closing costs are a key part of buying a home, but they can vary more than most people realize. Knowing your numbers (and how to potentially bring them down) can go a long way and help you feel confident about your purchase. Let’s look at typical closing costs in our area and get you a personalized estimate, so you can craft your ideal budget.
