Should You Rent Out or Sell Your House?
Deciding what to do with your house when you're ready to move is a significant choice. Should you sell it and leverage the proceeds for your next adventure, or should you keep it as a rental property to build long-term wealth? Many homeowners find themselves grappling with this decision, and it's not always an easy one. Whether you're considering the potential income from renting or have concerns about the challenges of being a landlord, there are several factors to weigh. Here are some key considerations to help guide your decision-making process. Is Your House a Suitable Rental Property? Even if you’re open to becoming a landlord, your house might not be the best candidate for renting out. Perhaps you're relocating far away, making maintenance and oversight cumbersome, or maybe the neighborhood isn't ideal for rentals. Additionally, if your house needs extensive repairs before being rentable, selling might be the more practical route. If these concerns resonate with you, then selling your home might be the preferable option. Are You Prepared for the Challenges of Landlording? Managing a rental property involves more than just collecting rent payments. It can be a demanding and occasionally difficult responsibility. For example, you might receive late-night calls from tenants about urgent repairs. There’s always a chance a tenant could cause damage that requires fixing before the next lease term begins. You may also have to deal with tenants who fall behind on rent or break their lease prematurely. As highlighted by experts: “It’s easy to find stories of landlords encountering more headaches than profits. Before deciding to rent, consider consulting with other landlords and conducting a thorough cost-benefit analysis. You might discover that selling your home is both a wiser financial decision and less stressful.” Have You Considered the Costs Involved? If you’re primarily considering renting out your home to generate additional income, remember there are extra expenses to factor into your budget. Here's a breakdown of potential costs you should anticipate: Mortgage and Property Taxes: You’ll continue to be responsible for these expenses, even if rental income doesn’t cover them entirely. Insurance: Landlord insurance tends to be about 25% more expensive than standard homeowner's insurance, providing coverage for damages and liability. Maintenance and Repairs: Anticipate spending at least 1% of the home's value annually, possibly more for older properties. Tenant Acquisition: This includes advertising costs and possibly fees for conducting tenant background checks. Vacancy Periods: If your property is vacant between tenants, it results in a loss of rental income. Management and HOA Fees: Hiring a property manager can alleviate some responsibilities, but they typically charge around 10% of the rent. Additionally, Homeowners Association (HOA) fees may apply. Conclusion Ultimately, the decision to rent out or sell your home is a personal one that hinges on your individual circumstances and financial goals. By carefully evaluating your options, you can make an informed decision that aligns with your future plans. Take the time to weigh the pros and cons, and don't hesitate to consult with professionals who can offer guidance and support. Making the right choice now will set you on the path toward a secure and prosperous future.
Are Home Prices Going to Come Down?
In today’s real estate landscape, headlines often paint a confusing picture of what’s happening with home prices. Some articles suggest an imminent crash, while others forecast continued growth. So, what’s the reality? Let’s dive into the facts and clarify what’s truly going on with home prices today. What Does a Price Correction Really Mean? The term "correction" is frequently used when discussing potential changes in home prices. But what exactly does that mean? Danielle Hale, Chief Economist at Realtor.com, explains it this way: “In stock market terms, a correction is generally referred to as a 10 to 20% drop in prices. . . We don't have the same established definitions in the housing market.” In the context of real estate, a correction doesn’t necessarily indicate a dramatic fall in home prices. Instead, it reflects a slowing pace of growth, where prices stabilize after a period of rapid increase. Essentially, home prices are not plummeting; they're simply finding a more sustainable growth rate. While individual markets may experience different trends, a drastic nationwide decline is unlikely. The Real Estate Market Is Returning to Normalcy Between 2020 and 2022, home prices surged at an unprecedented rate. Factors like low-interest rates, a significant shortage of available homes, and heightened buyer demand fueled this growth. However, such aggressive price increases couldn’t persist indefinitely. Now, we’re witnessing a slowdown in price appreciation—a key indicator that the market is gradually normalizing. According to recent data from Case-Shiller, while prices are still climbing, the pace is noticeably more measured compared to the dizzying heights of the past few years (See graph below): Current Trends: The latest figures show that home prices have begun to rise nationally after a period of relative stagnation last year. However, this increase is much more balanced and sustainable. Key Takeaway: The market has shifted from the extraordinary growth seen during the pandemic to a healthier and more manageable rate of price increases. What Lies Ahead for Home Prices? Looking ahead, experts agree that home prices will likely continue to appreciate, but at a more moderate pace. Marco Santarelli, Founder of Norada Real Estate Investments, puts it succinctly: “Expert forecasts lean towards a moderation in home price growth over the next five years. This translates to a slower and more sustainable pace of appreciation compared to the breakneck speed witnessed in recent years, rather than a freefall in prices.” The real estate market remains influenced by the fundamental forces of supply and demand. An increase in housing inventory coupled with decreased buyer demand—partially due to higher mortgage rates—will likely temper the upward pressure on home prices. Implications for Buyers and Sellers For potential homebuyers, the deceleration in price growth is undoubtedly welcome news. The rapid price hikes during the pandemic rendered homeownership out of reach for many aspiring buyers. Now, the landscape appears a bit more promising. Affordability: Slower price gains make homes more affordable, and the prospect of continued appreciation provides a sense of security that your investment will still grow over time. Odeta Kushi, Deputy Chief Economist at First American, notes: “While housing affordability is low for potential first-time home buyers, slowing price appreciation and lower mortgage rates could help—so the dream of homeownership isn't boarded up just yet.” On the flip side, sellers may need to adjust their expectations. While prices are not expected to drop significantly, the days of explosive gains might be over for now. Pricing homes appropriately for the market will be crucial to attracting buyers in this evolving landscape. Bottom Line At a national level, home prices are not expected to decline sharply. Most experts agree that while growth will continue, it will do so at a more moderate pace. However, keep in mind that real estate is inherently local, and market conditions can vary greatly depending on the area. This is where a knowledgeable real estate agent becomes invaluable. If you’re curious about what’s happening with home prices in your specific market, reach out to a trusted real estate professional for guidance and insights tailored to your area.
Why Buying a Newly Constructed Home Might Be More Affordable Than You Think
If you’re in the market to buy a home, there’s some exciting news for you. Many people assume that newly built homes are more expensive than existing ones (houses that have already been lived in), but that’s not always the case. In fact, exploring newly built homes can sometimes lead to more cost-effective options, especially today. Hard to believe, right? But the data doesn’t lie. Here are two key reasons working with your agent to look into new home construction could help you find a more budget-friendly option. Reason 1: Lower Median Prices for Newly Built HomesThe median sales price for newly built homes is lower than the median sales price for existing homes today. This might seem surprising, but it’s true according to the latest data from the Census and the National Association of Realtors (NAR): Why is that? Builders are focused on building what they can sell. And right now, there’s a very real need for smaller and more affordable homes – so that’s what they’ve been bringing to the market. At the same time, there are also more newly built homes already on the market than there have been over the past few years, so builders are motivated to make sure they’re selling what they’ve got available before adding more. Reason 2: Attractive Incentives from Home BuildersAnother big reason to consider a newly built home is the range of incentives that many home builders are offering. Again, since builders are aiming to sell their current inventory, some are providing special deals to sweeten the pot for homebuyers. HousingWire explains today’s trend: “Overall, the usage of sales incentives was up to 61% in June, compared to 59% in May.”One of the most appealing incentives right now is how builders are able to offer competitive mortgage rates. They may also provide other incentives, such as covering closing costs, or offering free upgrades. Why This Matters to YouConsidering a newly built home could open up opportunities you hadn’t thought of before. With competitive pricing and attractive incentives, you might just find that a brand-new home is the most appealing option for you. Bottom LineBuying a home is a big decision, and it’s essential to consider all your options. By looking into newly built homes, you might find a perfect fit for your needs and your budget. Let’s explore the possibilities together. If you have any questions or want to see what’s available, feel free to reach out.
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