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How About a New Workspace in a New Home?

As if there weren’t enough going on, the demand for existing homes has well exceeded the available supply. And so, homeowners ask more for their homes than they ever thought they could. Some get it and some don’t. And the bidding wars rage on in cities and towns. Experts say annual home sales for 2021 are expected to rise 10%.

Which brings us to America’s homebuilders. More new homes will be built in 2021 than any year since 2006.

While home shoppers with discretionary income have difficulty finding their perfect home, and must negotiate disproportionately inflated prices, what they have on their sides with new homes are low interest rates and builders ready to make deals­—that is, if:

(1) There are available lots

(2) Are reasonably priced

(3) Are unaffected by the ongoing lumber shortage and

(4) Have enough workers to do the job.

Housing Starts Signal Growth

You might remember in a previous article, the point was made about housing starts, a leading indicator referring to the number of new residential construction projects that actually begin in a particular month.

In a strong economy, people are more confident in purchasing new homes. So in a strong economy where builders are busy, their work is reflected in the nation’s New Residential Constriction Report, also known as housing starts.

Housing starts also serve as a key economic indicator of where our economy is, and might be heading. Current confidence shows buyers – many who migrated from other cities and towns and work remotely – are building larger homes with pools and outdoor entertaining areas. Inside, as you can imagine, their workspaces are larger and more efficient.

Whether they return to the office or continue to work from home, these workspaces aren’t likely to go out of style any time soon. And because there is plenty of pent-up demand, and people not spending money like they used to, many new buyers are in “upgrade” mode.

Buying is Good for You, and the Economy

With any new home, new furnishings are a given. When the furniture ads rev up, along with the push for zero percent interest financing, you know something positive is occurring in the home sector. While it is true that real estate agents gear up for the annual spring home buying season, the beginning of the year is actually the best time to buy a home. Motivated buyers in Snow Belt states don’t seem to mind going out and braving the elements to shop.

Furniture, appliance and flooring dealers know and depend on this, as they are typically the first approached. Special orders take time, and quick decision-makers have learned from watching numerous DIY home buying and remodeling TV programs that a trained eye is a huge asset to getting what they want, at the price they want, and when they want it.

Renting vs. Buying

People tend to move during late spring to early fall when kids are out school and the weather is much more pleasant. Understandably, when more people are moving, so does higher rental demand. In some cases, so does the price. The most important thing to remember is the rental home must fit your needs.

Regardless of the age group, the question we always ask first is, “What do you feel can you afford?” even if we already know the answer. We do this because if a client has a life-changing situation occurring, such as divorce or recovery from a major illness, making a large purchase on a particular home, or taking on a financial obligation for a particular rental may not be in their best interest. Basically, we must weigh the expenditure.

Unfortunately, when you rent, you spend more. A California-based data company found it is better to buy than to rent in six out of seven Tampa Bay’s seven counties. The Tampa real estate market is higher than the national average where it is 40%-60% cheaper to buy versus renting. The national average is 45%. Trulia.com found that in the 100 largest metro areas in the country it is cheaper to own than to rent.

A resident in one county would need to spend over 37 percent of their paycheck to afford the rent for a three-bedroom property. In comparison, the average price to purchase a home was $239,950 and a buyer would need to spend 29 percent of their wages to buy.

Some financial experts say you could have invested the money you spent year after year on a house. Except, if you live in an area where rent is $2,500, and a monthly mortgage payment, maintenance and taxes are $5,000 – you saved about 40% by renting.

Will You Stay in the Home for the Next 30 Years?

“Buying a home is one of the best long-term investments you can make.” You’ve heard that before. But some people say it couldn’t be farther from the truth. Owning a home takes money out of your pocket, for property taxes, insurance, maintenance, furnishings, etc., again, money you could have invested. The supposition is: larger rooms equal larger expenditures, and additional rooms equal additional expenditures.

The reasons for staying in the home for 30 years go out the window if you secured a 30-year mortgage and moved out in 9 years, which most people generally do. You cannot expect your property value to increase much in that time, and you cannot offset the costs because appreciation usually comes later on. So before you consider making the largest purchase of your adult life, talk with your Hefren-Tillotson advisor to go over the numbers.

Buying a house may be the largest buy you’ll ever make, but it might also be the largest sell you’ll ever make. And for some people, selling your property or paying off the mortgage can help you retire earlier and, perhaps, better. It is something to think about. We would be happy to talk with you about it.

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

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