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Millennials: Diversify with Housing
Justin DeCesare is back as our guest blogger today. Justin is the CEO of Middleton & Associates Real Estate, one of the largest independently owned Brokerages in coastal San Diego.
A recent article written by Kelley Holland of CNBC titled “Retirement trumps home ownership for millennials” references a National Endowment for Financial Education study that claims only 13% of Millennials see home ownership as a top priority.
Half of the same sample claimed retirement saving was their primary goal.
To me, as both a Millennial and a Real Estate Broker/CEO, the answers to this survey stem from the perception of what home ownership is.
The last decade, or the fail decade as it is known by MSNBC’s Chris Hayes, has wiped out countless sums of home equity. Even in the gains of the last two years, we are not back at the record highs of 2005 and 2006.
The correlation here is that this decline in home prices is when Millennials have come of age. We have grown up in a time when people began treating home ownership like they would a swing trade. It became the same as renting, but with the possibility for a quick return. Pride of ownership left the picture and Real Estate was turned into another get rich quick scheme.
The free-market economics of the Real Estate Market took over when the bubble was too full, and for most of the average Millennials adult life they have heard nothing but Real Estate negativity in the media.
As the market rebounds, and the understanding that home ownership provides for long term wealth takes over the perception of how retirement savings can be made, I am sure future results of this study will change.
1994 was 20 years ago.
Go back in the public records (or your MLS if it reaches two decades ago) and find some homes that were sold and have remained with one owner since. Even considering the plummeting values of the late 2000s, the home values and retirement savings are still there.
As Agents and Brokers, it is our duty to help our clients and not simply act as a salesman.
My suggestion to you is that as you are breaking down the monthly payments of your young clients’ mortgage, help them see how the home itself is more than a dwelling and how it will play into the diversity of their retirement plans.
Future House Prices: A Look into the Crystal Ball
Today, many real estate conversations center on housing prices and where they may be headed. That is why the Home Price Expectation Survey is a great barometer. 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.
The results of their latest survey
- Home values will appreciate by 4.4% in 2014.
- The cumulative appreciation will be 19.5% by 2018.
- That means the average annual appreciation will be 3.6% over the next 5 years.
- Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of 9.4% by 2018.
Individual opinions make headlines. This survey is a fairer depiction of future values.
FSBO Millionaires Use Real Estate Agents
We pride ourselves on the quality of real estate information we deliver each and every day. We try to gather empirical evidence to validate the positions we take. We do not use just an anecdotal story to make a point. We also do not get caught up in the sensationalism of the moment. However, today will be different.
Do as I Say… not as I Do
This adage could be no truer today after it has been reported, in a recent Herald Tribune article, that when it came to selling his Florida mansion, Al Bennati, the longtime chief executive of BuyOwner.com, has chosen to list his home with a local real estate agent.
BuyOwner.com is one of many websites out there now that encourage home owners that they do not need to enlist the help of a professional agent to be able to sell their home. They go as far as to tell homeowners:
“BuyOwner.com allows you to reach the most potential buyers in the shortest amount of time, in the most effective (the Internet) and most cost effective manner (no commission!) possible.”
Let’s break down that statement:
Myth #1 – The internet is the most effective way to sell your home
Many have said that, with the introduction of home search on the internet, hiring an agent is no longer a necessity. When the time came to list his own home, Bennati went against his own advice saying:
“To sell a home of this magnitude, it needs to be done by a person and a company that reaches buyers of this caliber.”
Myth #2 – FSBO’ing is the most cost effective solution
Without proper exposure to the “right kind of buyers” your home will not sell. Many real estate professionals have elaborate strategies to get your listing in front of exactly who needs to see it.
The most recent Home Sellers’ and Buyers’ Profile Report from the National Association of Realtors revealed that, though 92% of buyers search for a home on the internet, 90% still use a real estate professional.
This isn’t the first time that a CEO of a major FSBO website has enlisted the help of an agent when the time came to sell their own home. In August of 2011 it was reported that Colby Sambrotto of forsalebyowner.com who, after failing to sell his home using FSBO websites, needed an agent to sell his NYC apartment.
And, he got more money!!!!
Bottom Line
Two separate people made fortunes convincing others to sell their home through their FSBO sites. Yet, when it came to selling their own home, they recognized the value of using a real estate professional.
There is a reason the real estate industry has been around for centuries: it performs a valuable service.
Selling a House? FannieMae Suggests You Use an Agent
There are many advantages a homeowner has when they use a real estate professional to help sell their home. It’s good to know that FannieMae agrees. Here is a quote directly from the Know Your Options section of their website.
The Importance of the Latino Community to Today’s Real Estate Market
The Hispanic community was hit hardest by the housing crash. Now that the market is recovering, many of these families have the opportunity to either buy a home again, or those that lost home value during those years, are seeing equity return allowing them to sell and move to the home that they always wanted.
These buyers are ready, but according to a recent survey done by NAHREP (the National Association of Hispanic Real Estate Professionals) there are barriers that do not allow these buyers to enter the market right now. As real estate professionals is our duty to remove some of these barriers, if possible, and help as many families as we can become homeowners if they are willing ready and able to.
The Hispanic community is becoming a very important part of today’s real estate market, “The number of Hispanic households has grown to 14.7 million in 2013 and today a Hispanic youth turns 18 every minute of every day,” according to the 2013 State of Hispanic Homeownership Report.
4 out of 10 new households in the United States are expected to be Hispanic in 2014, this is a major opportunity for real estate professionals.
5 Reasons to Hire a Real Estate Professional
Whether you are buying or selling a home, you need an experienced Real Estate Professional to lead you toward your ultimate goal. In this world of instant gratification and Internet searches, many sellers think that they can For Sale by Owner or FSBO.
The 5 Reasons You NEED a Real Estate Professional in your corner haven’t changed, but rather have been strengthened in recent months due to rising interest rates & home prices as the market recovers.
1. What do you do with all this paperwork?
Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true Real Estate Professional is an expert in their market and can guide you through the stacks of paperwork necessary to make your dream a reality.
2. Ok, so you found your dream house, now what?
According to the Orlando Regional REALTOR Association, there are over 230 possible actions that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, who knows what these actions are to make sure that you acquire your dream?
3. Are you a good negotiator?
So maybe you’re not convinced that you need an agent to sell your home. However, after looking at the list of parties that you need to be prepared to negotiate with, you’ll realize the value in selecting a Real Estate Professional. From the buyer (who wants the best deal possible), to the home inspection companies, to the appraiser, there are at least 11 different people that you will have to be knowledgeable with and answer to, during the process.
4. What is the home you’re buying/selling really worth?
Not only is it important for your home to be priced correctly from the start, to attract the right buyers and shorten the time that it’s on the market, but you also need someone who is not emotionally connected to your home, to give you the truth as to your home’s value.
According to the National Association of REALTORS, “the typical FSBO home sold for $184,000 compared to $230,000 among agent-assisted home sales.”
Get the most out of your transaction by hiring a professional.
5. Do you know what’s really going on in the market?
There is so much information out there on the news and the Internet about home sales, prices, mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to, to tell you how to competitively price your home correctly at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a low-ball offer?
“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.” – Dave Ramsey
Hiring an agent who has their finger on the pulse of the market will make your buying/selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.
Bottom Line:
You wouldn’t hike up Kilimanjaro without a Sherpa, or replace the engine in your car without a trusted mechanic, why would you make one of your most important financial decisions of your life without hiring a Real Estate Professional?