Beacon Hill condos for sale
Should you buy a Beacon Hill condo is this real estate market? There’s a wealth of conventional wisdom as well as new data that may be helpful in making that decision. From equity to quality of life, let’s look at the reasons to buy a home in Beacon Hill.
According to a recent by NAR, home equity is by far the biggest source of wealth for the majority of American households. Until you get to the highest income brackets, you just don’t see people making any other major investments.
Like it or not, the system works. By keeping, an average, one-third of their assets in their principal home, American households find greater financial stability and the ability to move funds around when emergency needs come up.
Although only a percentage of homeowners end up refinancing or taking out a home equity loan, it does happen. Usually, home equity is put right back into the home through remodeling projects, but some homeowners also use the cash to go back to school or invest in a business. Making the decision to tap into home equity should not be taken lightly — but you don’t get to make the decision unless you’ve purchased a home and have put some equity into it.
Now, you skeptics may be thinking, “Investing in real estate only makes sense if the value increases over time.”
This is true! (See Reason #1) I’m a real estate agent, not an investment advisor, so I am not making any guarantees that home values in Beacon Hill will increase. In fact, there is a decent chance Boston home values will decrease slightly in the short term and increase significantly in the long term. I will provide the following figures and let the buyer decide (statistics from Metro, the regional governing agency):
- Boston’s population is set to increase over the next 20 years, adding about new residents.
- Over the past 10 years, the region grew its economy and added high-wage jobs at higher rates than almost any other large U.S. metro area, which means that people are working, earning a good salary, and will soon be able to buy a home if they haven’t already.
- Boston will continue to see a deficit in single-family homes over the next 20 years, and 1,300 additional new homes will be needed to close the gap. This translates to more demand for existing homes, and prices going up unless many more homes suddenly come on the market.
- To build more homes, especially affordable Boston condos. More importantly Boston needs more land.
Let’s say your Beacon Hill home doesn’t go up in value. Are there still financial reasons to be a homeowner?
In this country, the cards are definitely stacked in favor of homeowners over renters. Take, for instance, the major players in Washington who lobby for housing policy: The National Association of Realtors, the National Association of Homebuilders, and the Mortgage Bankers Association. All of these groups go to bat for homeowners, not renters.
The result is that there are numerous laws, mostly having to do with taxes, that benefit homeowners but not renters. These include:
- The mortgage interest deduction. For the tax years 2018-2025, homeowners can deduct the interest on up to $750,000 of mortgage debt incurred to buy or improve a first or second residence.
- Deduct up to $10,000 of state and local property tax from your federal tax (as of 2018).
- Capital gains tax reduction. When you remodel or sell the home, deduct those costs from your net profit and pay less in taxes. Individual profits of up to $250,000 or $500,000 for a couple from a home sale are tax-free.
Homeowners also benefit from other federal housing subsidies such as reduced rates on insurance and potential mortgage assistance for underwater homes.
Most renters have no recourse if their landlord decides they don’t want to rent to them anymore. In addition, if you already rent you know that the amount you pay tends to go up over the years, while the house or apartment you get doesn’t necessarily improve. According to Yardi Matrix apartment data, the average rent in the Boston metro area went up nearly 20% in the three-year period from 2014 to 2017. By comparison, in the same time period rents went up by 12% in the national average.
Even if you have to borrow up to 95% of the value of your home in order to make that purchase, your mortgage payments can be fixed over the 15-year or 30-year term of the loan. Though nobody should borrow more than they can pay back on a monthly basis, refinancing is often an option later on if for some reason things change and you can’t make that payment.
The best part is — you stay in the home as long as you want, make the improvements you need or want, and move when you’re ready.
According to the Federal Reserve, the typical (median) homeowner has a net worth of $230,000, while the typical renter has a net worth of around $5,000.
Why is there such a huge difference? In Portland, homes have been gaining in value between 7-10% annually for the past few years; nationally, homeowners can expect to see a 3% gain in home values every year. Forbes.com breaks it down this way:
A vast majority of homebuyers take out a 30-year fixed rate mortgage to make a home purchase. After 30 years, there is no mortgage payment (nor rent payment). So the home price growth over that time period would be the equity that the homebuyer would have accumulated. For example, the median home price of a single-family dwelling in the U.S. thirty years ago in 1985 was $75,500. This year, it will be at least $220,000. That figure of $220,000 is the housing component of the person’s wealth. Even had home prices not risen, the person would still have $75,500 in wealth today – on top of not paying any further monthly mortgage after 30 years.
Numbers don’t lie. Unless increasing your net worth over your lifetime is not on your list of goals, long-term renting simply doesn’t make sense if you can afford to buy a home, especially in a strong housing market like Boston Beacon Hill.