Tier One Real Estate

When you purchase a home you are not just buying a home, you are making an investment. As with all investments you want to know if you will get good returns, or if you will lose money.

History shows that in the U.S. homes increase in value about five percent per year. Now obviously in some years homes will increase more than 5 percent and some years will see homes decrease in value. Home price appreciation also varies from region to region.

Now 5 percent may not seem much, you could probably earn more by investing in the stock market. The difference is when you buy a home the chances are you will not be paying cash, most of the cost of the home will be covered by a mortgage. For example, typically you put 10% down and the remainder is paid via a mortgage. So given this information if you purchased a $200,000 home, your cash investment would be $20,000. With an average appreciation of 5 percent, your first year's return would be $10,000, that's a return of 50% on your cash investment of $20,000.

Now obviously there are other costs to consider. There is the property tax, home insurance, utilities, maintenance and of course the mortgage payment. While these costs may seem to cancel out any gain in home value, there are certain criteria, which can offset this cost.

For a start both property taxes and mortgage interest can be deducted from your taxable income. So for example, if you pay $10,000 in mortgage interest and property taxes in a year, you would get a $10,000 taxable income deduction. The other main cost, which offsets your mortgage, is the cost of rent you would be paying if you had not purchased a home. With rent you receive no benefit, any appreciation in a homes value benefits the landlord, while you pay the landlords mortgage via your rent payment. In other words rent is dead money.

One of the other benefits of owning your own home is that you have fixed monthly mortgage payments (assuming you have a fixed rate mortgage and not a variable rate mortgage), which makes it easier to plan your finances. With a normal fixed rate mortgage your interest payment will always be the same, if the monthly payment is $1000, then in 10 years time the monthly payment will still be $1000. How much will your rent have gone up in those 10 years?

Depending upon the type of mortgage you choose, owning your own home may also help you save money. With a repayment mortgage each time you make a payment, some of the money goes towards the interest and some of the money is used to pay down the principle. This means you are reducing your loans balance, if effect increasing your savings (assuming the value of your home is not going down).

The benefits are clear. Buying your own home could be the biggest and best investment you make in your life.

One question that we Realtors get asked regularly by folks who are listing their homes for sale is what do-it-yourself home improvements would be most beneficial in selling their home. 

HomeGain just released the results of their annual survey, Home Sale Maximizer.  This survey covers the top do-it-yourself home improvements as recommended by Realtors, and the expected monetary return on investment.  After reading the survey results I have to say that based on my personal experience I would have to agree.

According to the HomeGain survey, the top five home improvements that Realtors recommend to home sellers based on cost and return on investment (from highest to lowest ROI) are: 

1. Cleaning and de-cluttering ($200 cost / $1,700 price increase / 872% ROI)
2. Home staging ($300 cost / $1,780 price increase / 586% ROI)
3. Lightening and brightening ($230 cost / $1,300 price increase / 572% ROI)
4. Landscaping ($320 cost / $1,500 price increase / 473% ROI)
5. Repairing plumbing ($385 cost / $1,250 price increase / 327% ROI) 

"Many Realtors agree, especially in a buyer's market, that sellers who make these recommended home improvements often get their homes sold faster and at higher prices," stated Louis Cammarosano, General Manager at HomeGain.

Rounding out the top 12, the list of low cost, do-it-yourself home improvements includes: updating electrical, replacing or shampooing carpets, painting interior walls, repairing damaged floors, updating kitchen, painting outside of home, and updating bathroom's.

The home improvement projects with the highest price increases to a home's resale value are updating the kitchen ($1,200 cost / $2,850 price increase), followed by painting the outside of the home ($900 cost / $1,815 price increase) and home staging ($300 cost / $1,780 price increase). 

I offer all my clients a complimentary evaluation of their home and what things they can do to increase their odds of selling in the least amount of time and for the most money.  I also can offer a list of good, professional stagers and home organizers.  Some sellers are very receptive, and some are not. 

Congress has extended and expanded the homebuyer tax credit. The modifications become effective when President Obama signs the bill. The dates enacted in Feb 2009 expire Nov 30, 2009. The new rules extend the credits from Dec 1, 2009 to April 30, 2010. See the PDF attachment for a side by side comparison of the changes.
Homebuyer Tax Credit Changes.pdf

Congratulations! You just made it through the worst economic downturn since the 1930s. While it may be a little premature to declare the recession is over, all indications point to a growing economy and a recovering housing market. The biggest news of an economic turnaround came last week when the Commerce Department reported that all goods and services produced (gross domestic product) in the United States rose at an estimated annual rate of 3.5 percent in the third quarter.

The positive uptick follows one year of negative declines to GDP. Closer to home, sales of existing single-family homes across the Wasatch Front climbed 4 percent in this year's third quarter compared to the same period a year ago. The increase was the first time in four years that home sales showed a year-over-year increase during a third quarter.

Nationally, the good news is that home prices have stabilized and even started to rise. According to the latest S&P/Case-Shiller Home Price Report, 17 of 20 major metropolitan areas showed house-price increases from July to August. Of the 20 cities tracked, only Charlotte, Cleveland and Las Vegas showed small decreases (Salt Lake City was not included in the report). These developments, in part, led Moodys/Economy.com economist Mark Zandi in a recent report to national homebuilders to declare that "the housing crash is history."

For home buyers, that means the bottom of the market has likely come and gone. And more personally, it means the worst is behind us.