Buying a Boston condo. There are many financial and non-financial benefits of homeownership, and the greatest financial one is wealth creation. Homeownership has always been the first rung on the ladder that leads to forming household wealth. As Freddie Mac explains:
“Homeownership has cemented its role as part of the American Dream, providing families with a place that is their own and an avenue for building wealth over time. This ‘wealth’ is built, in large part, through the creation of equity…Building equity through your monthly principal payments and appreciation is a critical part of homeownership that can help you create financial stability.”
Odeta Kushi, Deputy Chief Economist at First American, also notes:
“The wealth-building power of homeownership shows that home is not only where your heart is, but also where your wealth is…For the majority of households that transition into homeownership, the most recent data reinforces that housing is one of the biggest positive drivers of wealth creation.”
Last week, CoreLogic released their latest Homeowner Equity Insights Report, which reveals the surge in wealth created over the last twelve months through increased home equity. The report makes five key points:
- Roughly 38% of all homes are mortgage-free
- The average equity gain of mortgaged homes in the last year was $26,300
- The current average equity of mortgaged homes is greater than $200,000
- There was a 16.9% increase in total homeowner equity
- Total homeowner equity reached over $1.5 trillion
Here’s a map that shows the equity gains by state: Increasing equity is giving homeowners the power to better manage the challenges of the pandemic, especially for those spending more time at home. In the report, Frank Nothaft, Chief Economist for CoreLogic, explains:
“This equity growth has enabled many families to finance home remodeling, such as adding an office or study, further contributing to last year’s record level in home improvement spending.”
The financial advantage homeowners have has not gone unnoticed. In the same report, Frank Martell, President and CEO of CoreLogic, states:
“This growing bank of personal wealth that homeownership affords was noticed by many but in particular for first-time buyers who want a piece of the cake.”
Last year, the Rosen Consulting Group released a report outlining the benefits of homeownership. In that report, they explained what an increase in net worth – which they call the “wealth effect” – means to the economy:
“In economic literature, the wealth effect is a term used to describe the fact that individuals have a tendency to increase their spending habits when their actual or perceived wealth increases. For homeowners, the latent savings achieved by building equity in their home and the growth in home values over time both contribute to increased net worth. Through the wealth effect, this in turn translates to households having a greater ability and willingness to spend money across a wide range of other types of goods and services that spur business activity and provide a positive multiplier effect that creates jobs and income throughout the economy.”
If you are thinking about buying a Boston condo in the near future, you are probably getting a lot of advice from family, friends and Boston real estate brokers. But remember, family and friends may have your best interests at heart, they may not be fully aware of your needs and what is currently happening in the Boston condo market. Let’s look at whether or not now is actually a good time for you to buy a Boston condominium.
There are three questions you should ask before entering the Boston real estate market:
This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances. A study by the Joint Center for Housing Studies at Harvard University reveals that the four major reasons people buy a home have nothing to do with money:
• A good place to raise children and for them to get a good education.
• A place where you and your family feel safe.
• More space for you and your family.
• Control of the space.
What non-financial benefits will you and your family derive from owning a Boston condo? The answer to that question should be the biggest reason you decide to purchase a Boston property or not.
When looking at future housing values, Home Price Expectation Survey provides a fair assessment. Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts, and investment & market strategists about where prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.
Here is what the experts projected in the latest survey:
• Home values will appreciate by 4% in 2015.
• The cumulative appreciation will be 23.5% by 2019.
• Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of over 15.1% by 2019.
A Boston condo buyer must be concerned about more than just prices. The ‘long term cost’ of a condominium can be dramatically impacted by an increase in mortgage rates. The Mortgage Bankers Association (MBA), the National Association of Realtors, Fannie Mae, and Freddie Mac have all projected that mortgage interest rates will increase by approximately one full percentage over the next twelve months.
Homeownership builds wealth through equity, and this creates a positive impact for homeowners and their communities. Let’s connect today if you’re ready to invest in a home of your own.
Only you and your family can know for certain the right time to purchase a Boston condo. Answering these questions will help you make that decision.
If you’d like more information on the Boston condo market, please feel free to contact me at 617-720-5454 or you can email me @ email@example.com.
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Updated: Boston Real Estate Blog 2021