“Home prices and the economy are both enjoying robust numbers… Nevertheless, home prices I cannot rise faster than incomes and inflation indefinitely.” –David M. t Blitzer, managing director, Index Committee, S & P Dow Jones Indices.
Single Women on the Move!
The real estate market tends to mirror changes in society, including the rising number of single adults. Given that trend, it’s not surprising that the number of singles who buy homes is also on the rise.
Single women made up 17% of American homebuyers as of last October, according to the Profile of Home Buyers and Sellers, a publication from the National Association of Realtors (NAR). That’s the highest percentage since 2011, when women represented 18% of homebuyers.
In fact, single women are more than twice as likely to buy homes as unmarried men, who made up only 7% of the home market in 2016, according to NAR. The reasons for the disparity is unknown. One possibility is that many single women are raising children and taking care of aging parents, so it may make sense to look for larger living quarters with a yard.
Trend Likely to Continue
Another possible reason that more single women are buying homes is their salaries are improving. Fortune magazine reports a “significant rise” in the share of women earning more than $100,000 over the past several years in cities like Boston, San Francisco, Seattle and San Diego. The same survey, interestingly, reports the number of men earning $100,000 or more has fallen in Boston, Seattle and San Diego.
On the broader national level, unfortunately, the salaries of women continue to lag behind those of their male counterparts. As of October 2016, females earned much less ($55,300) than their male counterparts ($69,600).
Job Growth Is Key
NAR chief economist Lawrence Yun notes, “With job growth holding steady and credit conditions becoming somewhat less stringent than in past years, the willingness and opportunity to buy is becoming more feasible for many single women.”
Another expert who agrees is Jessica Lautz, NAR managing director of surveys, research and communications. “Rising incomes may be especially important because single, female homebuyers have traditionally stretched their budgets to buy homes,” she says.
In addition to their willingness to be frugal, women are also increasingly willing to buck tradition for the sake of home buying. Formerly, many women waited until marriage before buying a home. Nowadays, however, some women are no longer willing to wait for matrimony before signing a purchase agreement, according to Ilona Bray, a writer for Nolo.com.
One woman interviewed by Bray says she originally planned to marry before taking the plunge into ownership. The long-anticipated relationship, however, failed to materialize and she was no longer willing to postpone owning a house of her own.
“Finally I got to realize, I can’t wait forever for the right partner,” she tells Bray.
That attitude makes sense to Lautz: The NAR homebuyer profile shows that more women than men think buying a home is a good financial investment. Many women “are thinking of the pure desire to own a home and to settle and make roots,” adds Lautz.
Mortgages, Costs and More Costs
Homeownership, after all, represents freedom and independence to women just as much as men. “I want to be comfortable in my own living environment where I make my own rules and my own decisions,” says Lorenzo, a 24- year-old woman interviewed by Money magazine.
Like all homebuyers, single women need to be aware of some basic financial disciplines of purchasing a home. This investment involves many expenses, not just the monthly mortgage. Costs include the bank fees and dosing costs for the purchase itself, plus property taxes and monthly maintenance.
Affordability means a lot more than being able to handle the mortgage. At purchase time, buyers must have enough cash to cover closing costs, including possible “points” and bank fees. Additionally, the cost of mortgage insurance can break some budgets.
Many homebuyers are also juggling the expense of monthly car payments, student loans and utility payments. And there’s property taxes on top of that. After adding in all those expenses, a mortgage that started out looking affordable may turn into an unsustainable burden.
Here’s one rule of thumb to help decide if one can afford to own a home: Home buyers should have at least 10% of their income left over to contribute to their retirement savings, after paying the mortgage and all other bills. (At this point, it’s easy to imagine the sound of pencils snapping across America, as people realize in frustration that their numbers don’t work.)
Another rule of thumb, this time for handling the extra burden of property taxes: Divide your tax bill by 12, and set it aside for your tax payments (unless your monthly tax payment is already included with your loan bill). If you don’t, you can find yourself stuck with an expensive bill that you can’t pay.
Additionally, those who purchase a home in a condominium complex or homeowner’s association are liable for association dues, which can increase overtime. Homeowner associations also have the right to charge additional fees for improving or repairing common-area amenities, such as swimming pools and tennis courts.
Protecting Your Asset
Let’s say you’ve figured out how to pay the mortgage and other costs of home owning. Now, you need to protect your asset. “All the responsibility lies on you,” says Chantel Bonneay, a wealth management advisor at Northwestern Mutual”, so it’s important that you protect your home, which is your biggest asset.”
To this end, many homeowners buy several types of insurance, including life, disability and health insurance. Health insurance will help keep your medical costs down in the event of illness or accident, so you can continue paying your mortgage.
Disability insurance guarantees you a stream of income in the event that you get sick or become injured. And life insurance can help pay off your mortgage in the event of your death, so the person who inherits your house won’t get hit by an expense that he or she can’t afford.
How much insurance is appropriate, however, varies from individual to individual. This is a good topic to discuss with your estate planner or insurance agent. (If those kinds of professionals are not already in your life, homebuying is a good reason to seek them out.)
Homebuying, particularly putting together the down payment, often requires help from others. (In-many Loans, 20% of the purchase price is required up front.)
SURBAN BLENDS URBAN AND SUBURBAN
“There’s been plenty written about the move from suburban-style sprawl – marked by McMansions and strip malls – to more dense communities of different housing arrangements, such as town houses, apartments and single-family homes, together in the same neighborhoods. In 2017, look for a new name for it: surban….With surban living, it’s possible to walk to work, like in a city, as well as enjoying pedestrian access to groceries, entertainment and youth-and sport-friendly parks – plus reliably strong public schools.” -Realtor magazine
Coming Up With the Down Payment
In today’s high-priced home market, however, it may be more difficult than before to save up for the down payment, especially in cases where young families are living paycheck to paycheck. In these cases, it may be advisable to consider the possibility of taking a loan from parents, other relatives or even financially well-off friends, according to Money magazine. (Discuss this option with your real estate professional first, because this could impact your loan qualification.)
If you do decide to take out a loan with a relative or friend, you should handle it as a business transaction. You are making a formal agreement to pay back both principal and interest, just as you would pay off a bank loan.
Bray recommends that you and your lender should decide upon some moderate interest rate. She suggests that the interest charged should be less than that of a bank loan but more than that paid on Certificates of Deposit. (As this loan agreement may be legally binding, it’s strongly recommended that you consult with a lawyer before entering into such a commitment.)
Other buyers may qualify for various mortgage guarantee programs, such as Federal Housing Administration (FHA), which offers several programs that can lower your down payment far below the standard 20%. (The interest rate varies from borrower to borrower, based on their income and credit rating.) And if you’re a veteran, you may qualify for a no-down payment VA home loan. For more information on available assistance programs, contact your real estate professional.
Advice and Cautions for Women Buyers
Some financial experts urge women to buy homes, even if it entails some budget-stretching. Mariko Chang, a consultant who recently completed a report on the wealth gap for women said that women should make the extra effort to buy homes and achieve financial stability. Although the housing market goes up and down in cycles, property tends to appreciate over time, and long-time homeowners will have a valuable asset, she says.
“You shouldn’t think of a home as an investment that will make you rich,” adds Lisa Aiken, a Chicago-based certified financial planner, “But if you buy a home that you can afford to pay off, maintain and live in over a long period of time, you’ll have a low-cost place to live in retirement.”
Personal Growth – and a Mortgage
The first-time home-buying experience often makes owners feel like strong, independent adults who are in control of their lives and are planning for the future.
Lorenzo, the single-woman homebuyer we met earlier in the story, took four months to find a home. During that time, she made several offers on various homes, only to be beat out by other buyers. (This is a frustrating but not unexpected part of homebuying). At last she found a home that was right for her in the $300,000 range.
Lorenzo says the home-buying experience was challenging in some ways and involved some personal growth. “It’s a demanding process that requires a lot of critical thinking,” she says. “You can only grow from the experience.”
Consumer Confidence At High Point
“The Conference Board said its Consumer Confidence Index rose to 113.7 [at the end of 2016] and was the highest since August 2001. Lynn Franco, director of economic indicators at The Conference Board, said in a statement that the gain in confidence was entirely because of rising expectations, as consumers’ assessments of current conditions dipped, and was led by surging optimism among older Americans. The modest pullback in current conditions still suggests that economic growth continued through the final months of 2016/ Ms. Franco said. Looking ahead to 2017, consumers? continued optimism will depend on whether or not their expectations are realized.”—The New YorkTimes
Gov’t Assistance for Qualified Buyers
Other forms of home-buying assistance are available from the federal government. In many cases, however, you might need to show a qualifying level of income: Several of these programs are designed to help low-income households buy homes.
Housing grants from the U.S. Department of Housing and Urban Development (HUD) assist qualified buyers with their down payments. The grant takes the form of a direct cash payment to the homebuyer, and does not need to be repaid.
In other cases, HUD will help buyers by paying their mortgage insurance. This can help buyers who are able to afford a down payment but who lack enough cash to pay the additional insurance premium.
Another government program can lower your monthly mortgage bill by half a percentage point (0.5%). For many buyers, this assistance can help balance a tight budget. In addition, other grants are available for home improvements and for making dilapidated homes habitable.
HOME BUILDING IS UP
“Multifamily starts are down while single-family construction is up. Despite the recent decline, residential construction remains at a level that shows steady demand for housing. Building permits indicate that further growth is in store for residential construction [throughout] 2017. Inventory is likely to remain low this year, but it could increase by year-end. Limited inventory, particularly for lower priced homes, has made it harder for entry-level buyers to enter the market. The rise in mortgage rates and prices is likely to prompt more homeowners to put their homes on the market, which would lead to an increase in overall inventory later in 2017.” –Rodrigo Sermeno, Kiplingers