Showing posts from July, 2021

The Dynamics of Home Equity

For many people, their home is their largest asset and their best performing investment.   The equity in a home is the difference in what it is worth and what is owed.   Two dynamics, appreciation and unpaid balance, work in concert to make homeowner's equity grow. It can be said that you appreciate the fact that your home is your best financial investment.   It is also ironic that the appreciation, the increase in value, is what causes it to be your best financial investment. In a one-year period, the increase in value divided by the beginning value will determine the rate of appreciation for the year.   News stories and articles, frequently, report statistics on appreciation for the month, the year or longer. In many cases, a national appreciation is mentioned but the local appreciation is more reflective of an individual property. The National Association of REALTORS® reports " The median existing-home price 2  for all housing types in June was $363,300, up 23.4% from

Doing Nothing is Costing Something

It has been said that more money has been lost due to indecisions than ever was due to making the wrong decisions.   Many times, the larger the decision, the more likely procrastination comes into play and doing nothing will cost something.   Buying a home is certainly one of the biggest decisions people make.   Careful consideration and planning are necessary steps leading to a prudent decision.   Considering today's market that includes a global pandemic, financial volatility, and rapidly rising home prices, it is understandable that many people thinking about a home purchase are in a wait and see posture. However, there is a cost connected to waiting and it may be a lot more than you think.   The recent Home Price Expectation Survey 2021 Quarter two estimated appreciation rates will average just under 5% annual for the next five years.   It expects prices to increase by 8% in the next one year.   Being a renter or even putting off moving to a larger home, could keep you fr

Property Inheritance

Stepped-up basis is an incredible benefit to people who inherit property.   Not only do they receive the property itself, the basis or cost value of the property becomes the fair market value at the time of the decedent's death.   This avoids recognizing the gain between the decedent's cost and what it is worth when it is inherited. If a person had purchased a home for $100,000 and 20-years later when they died, it was worth $500,000, there would be a potential gain in the property of $400,000.   However, because of a tax provision called step-up tax basis, the person inheriting the property will have a basis of the fair market value at the time of death. The recipient could sell the property for $500,000 and have no taxable gain on the sale. A formal appraisal is the most reliable and defensible estimate of fair market value at the time of the decedent's death.   There will be a fee of several hundred dollars for the appraisal.   Another alternative is to get a broke

Less to Own than to Rent

The question is "financially speaking, are you better off owning than renting in the long term?" Renting a home has advantages.   It is usually a short-term commitment from year to year and the landlord is responsible for the repairs. Owning a home with today's low mortgage rates, the total house payment could easily be less than what the rent would be on a comparable home.   Once you assume ownership, you will have the responsibility of the repairs and possibly, a homeowner's association fee. Many times, an initial benefit of owing a home includes the ability to deduct property taxes and qualified interest on the mortgage.   With the increase of the standard deduction and a limit of $10,000 on state and local taxes, it is estimated that 90% of homeowners do not itemize their deductions to consider property tax and mortgage interest.   This comparison will not consider them. There are two very significant benefits that contribute to a home being an excellent i