Talking Real Estate

Homebuyers are getting a lot of mixed messages this year. Interest rates are near record lows, but housing prices are still rising. So should you continue to rent or go ahead and take the plunge to buy? That depends a lot on both your needs and where you live.

You may be wanting more space for home offices, play areas for kids, and more.  You may not have to be close to work, which is one reason why there’s a current exodus out of expensive cities like New York City and San Francisco to suburbs or smaller towns. Another reason is cost.

According to HomebuyingInstitute.com,  home prices will almost certainly continue to rise through 2021, primarily due to limited supply and strong demand. Interestingly, the pandemic appeared to fuel the housing market. Realtor.com reported that median home listing prices rose 15.4 percent between January 2020 and January 2021. And, in the 50 largest U.S. metros homes sold 12 days faster in 2021.  

At the same time, the number of homes for sale in January was down 42.6% year over year. That means 443,000 fewer homes for sale which only exacerbates demand.  

Mortgage interest rates hit record lows in January 2021, with nowhere to go but stay the same or go up. You may want to take advantage of that to keep monthly payments low before housing prices rise further.   

Meanwhile, some home markets may level off, while others like Austin, Seattle and Tampa are expected to heat up.

Many telecommuters notice their utility bills are dramatically higher. It makes sense if you’re using more lamps, cooking more, and using office equipment at home. You can check your thermostat, plug air leaks, replace worn insulation, and turn off lights when you leave the room, but there are other reasons your energy bills are higher.

According to the U.S. Department of Energy's Berkeley Lab, the typical American home has 40 products constantly drawing power, amounting to almost 10% of residential electricity use. Products such as air conditioners and microwave ovens can’t be switched off unless they’re unplugged, which means they’re drawing power 24/7. This is called standby power turning appliances with external power supplies, remotes, battery chargers and continuous display (LED) into energy-sucking vampires.

It’s impractical to unplug every lamp from every socket you’re not using, but if you’re leaving the charger in the wall, unplug it when you unplug your laptop. Get into the habit of unplugging electronics you’re not using frequently such as guest room televisions or cordless vacuum cleaners. If you need to replace an appliance such as a refrigerator, look for one that’s certified Energy Star, which is manufactured to need less standby power.

EIA.gov explains that electricity consumption varies in predictable patterns. Use is higher during summer and at certain times of the day. Utility companies charge more for “peak time” electricity use, so if you started telecommuting in the summer and working between 7:00 a.m. until 11:00 p.m. on weekdays, you’ll notice higher bills.

When you buy a home, plan on staying there for approximately five years. Why? You’ll need equity in order to sell the home without losing money.

Equity is your percentage of ownership VS how much the bank owns. With any mortgage loan, the first few years of payments go more toward paying interest than reducing your principal. To build enough equity to sell at break-even or a profit, you’ll have to recoup closing costs and fees as high as 14% in some areas. To build equity over time, do the following:

Put more money down. If you put 20 percent down, you’re in good shape, but if you put down 3.5%, 5% or 10%, it will take longer to build equity, so be patient.

Pay your mortgage on time and in full. Paying principal builds equity. The more months you pay, the more equity you’ll build.

Make additional mortgage payments. You can add an extra $50, $100, or any amount per mortgage payment. This will also help you get rid of private mortgage insurance or allow you to refinance to a PMI-free loan once you reach 22% equity.

Let time and the housing market work for you. The housing market typically rises one to two percentage points above inflation annually, but if you’re lucky, your home may gain much more value than that.

Building equity takes time, money and luck, which is why following the five-year equity rule will help you plan when to sell your home.