With Terry Story, 28-year veteran Real Estate Agent with Coldwell Banker in Boca Raton, FL
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House Appreciation Continues Apace in 2016 in Many Markets
On this week’s Real Estate Round-up, Boca Raton real estate agent Terry Story and Steve discuss house appreciation and the benefits of home ownership. 2016 has sustained the multi-year trend of house appreciation in many housing markets throughout the country. Terry cites mortgage giant Freddie Mac’s MiMi index (Multi-indicator Market Index) most recent reading as a reliable predictor that certain local markets—and to a lesser degree, broader markets—have yet to peak and, in fact, enjoy significant room for further appreciation. With this as yet untapped potential upside, home equity is expected to grow, offering homeowners the option of opening home equity lines of credit for, among other things, home improvement projects. Terry and Steve delve into state-level MiMi data which highlight which state housing markets have improved and which could have further house appreciation in the pipeline.
Benefits of Owning a Home
This last point provides a nice segue way into the next topic of conversation: the benefits of homeownership. Terry walks Steve through her top 10 reasons for owning instead of renting a home. Among these, the certainty of your monthly costs (outside of insurance and taxes) ranks at the top, as mortgage payments are fixed while rental rates are not. Number two on Terry’s list is house appreciation, which she admits is not guaranteed in the short term, but almost always is over the long haul. Another big advantage of owning a home is the freedom to make renovations to the house and property.
Some of the other reasons Terry cites include overall lower cost of maintaining the property, tax benefits, building equity in the home (which amounts to a “rainy day fund” savings account that can be utilized through a home equity loan) and the benefits of living in a community of fellow homeowners. Rounding out the list, Terry asserts that the advantages of home ownership in terms of retirement security is very compelling. Owning a home offers a nest egg which can be sold—often at a significant gain—to fund one’s needs for retirement income.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: It’s time for Real Estate Round-Up. This is the time every single week we get together with noted Real Estate Agent Terry Story. Terry is a 28-year veteran with Coldwell Banker located in Boca Raton, Florida. Welcome back to the show, Terry.
Terry Story: Thanks for having me, Steve.
Steve Pomeranz: Well, you know, home prices have appreciated a lot from their recession levels, but a new report shows that many home prices still have room to run. Tell us about that.
Terry Story: That’s right. There’s still a lot of equity-building potential for these homeowners. Freddie Mac’s multi-indicator market index, which is MiMi, stands at 86, which the mortgage giant says is basically on the outer edge of its historic benchmark range of housing activity. What does all of that mean? Basically, in a nutshell, it says a lot of the homes in the area have plenty of room to continue to grow in that equity-building process. The states that rank the best value in this range are states like Utah, Colorado, Hawaii, Idaho, North Dakota, and Oregon.
Steve Pomeranz: So, these are the states that—based on certain factors like interest rates and income to the cost of home ownership—they put all these factors together, they look at the previous price appreciation, they come up with a ranking that says, “hey, these are areas that still have room to grow because the economics are very favorable.” The top one is Utah, then Colorado, Hawaii. Actually, if you’ve been out to Colorado recently, you’re kind of going to believe it because the amount of activity out there is just unbelievable. Hawaii, Idaho, North Dakota, and Oregon. What are the states that have improved most year to year?
Terry Story: Well, this is where Florida shows up. Most improved, you have Nevada, Florida, Massachusetts, Mississippi, and New Jersey.
Steve Pomeranz: Why doesn’t it say here that if you build a house or buy a house within five miles of where Steve Pomeranz lives, there is no appreciation whatsoever.
Terry Story: You can’t lose.
Steve Pomeranz: I don’t think … I think it would be at the bottom of the state ranking there.
Terry Story: And metros areas. I kind of like this. Orlando is at the top of the market.
Steve Pomeranz: Oh, really?
Terry Story: I went to college in Worcester, Massachusetts. That’s number two.
Steve Pomeranz: Okay.
Terry Story: Tampa is number three. Chattanooga, Tennessee followed by Dallas, Texas.
Steve Pomeranz: All right. Kind of the south except for Worcester.
Terry Story: Worcester.
Steve Pomeranz: Worcester. I used to say that. Worcester.
Terry Story: Worcester.
Steve Pomeranz: How long ago did you actually lose that accent, because I don’t hear it?
Terry Story: Oh, I never had it. I’m from Florida.
Steve Pomeranz: Okay. Yeah, you sound like you’re a Florida girl. All right. Let’s get to your favorite topic here, Terry. I know what I’m going to ask you is going to just tickle you. Why buy a home? What are the top 10 benefits of home ownership?
Terry Story: Oh, wow! I love that one. Okay. The first one would be predictable payments. You know each month what your payment is going to be. Unlike rent, you’ll know for the term of the lease what your rent’s going to be, but the landlord could raise it.
Steve Pomeranz: So having control.
Terry Story: You have control.
Steve Pomeranz: Yeah.
Terry Story: Except your taxes, insurance constantly change.
Steve Pomeranz: Right. That’s right.
Terry Story: But your payment remains the same. Appreciation. Number two. You know, you buy a home—it’s not a guarantee that you’re going to get appreciation, long-term, yes, you will—but appreciation is a big reason why people purchase homes.
Steve Pomeranz: Yeah.
Terry Story: Number three-
Steve Pomeranz: Oh, hold on a second. You want to build up equity, and if you don’t even build up equity through home price appreciation, the fact that you are paying down your mortgage will automatically build some savings for you.
Terry Story: That’s correct.
Steve Pomeranz: All right. Go on.
Terry Story: Tax benefits. This is one of the few things that you can right now still write off the deduction.
Steve Pomeranz: As we record this …
Terry Story: As we record this.
Steve Pomeranz: Yeah, we don’t know about next year.
Terry Story: Who knows what 2017 brings.
Steve Pomeranz: Yeah.
Terry Story: This is really important. Freedom to modify your own home. You want to paint your room red, paint it red. You can renovate. You can do whatever you want. You own it.
Steve Pomeranz: Right.
Terry Story: Believe it or not, a lot of studies show that it is cheaper to own a home. Sometimes it feels like-
Steve Pomeranz: It doesn’t feel like that.
Terry Story: It doesn’t feel like that.
Steve Pomeranz: It’s never felt like that to me, you know. But I know people think that.
Terry Story: Supposedly, in theory, it’s cheaper to own a house.
Steve Pomeranz: Okay.
Terry Story: I’ll say that that’s true.
Steve Pomeranz: Yeah.
Terry Story: Increased privacy. You can add a fence. You can add a hedge.
Steve Pomeranz: Yeah.
Terry Story: You can do whatever you want.
Steve Pomeranz: It’s yours, man. You have control. That’s the big difference. Nobody can tell you, you can’t do this, you can’t do that inside your home.
Terry Story: Then, Steve, if you’ve got equity in a house, you have a built-in rainy-day fund.
Steve Pomeranz: Yeah.
Terry Story: You get an equity line of credit and draw from that. That’s a good thing. Community ties. Once you own a home, you’re established in a community; it’s just healthier for the community as a whole.
Steve Pomeranz: I think, would you agree, that a community that’s full of homeowners is a little more stable, or maybe a lot more stable, and maybe a little bit easier to forge relationships …
Terry Story: Absolutely.
Steve Pomeranz: … than a community that’s a rental where people are moving all the time?
Terry Story: Steve, all you have to do is drive into any rental community complex versus one that’s all owned by homeowners, where there’s very little investors in it because the association has strong rules against renting, and you’ll see the difference. It’s night and day.
Steve Pomeranz: Yeah. We used to-
Terry Story: It’s pride of ownership. There’s a lot of things. And investors. A lot of landlords are—you’ve heard the term—slumlords. They don’t care about their properties. They’re only in it to make a buck.
Steve Pomeranz: Right.
Terry Story: It’s sad, but you’ll see that, and you can tell if you’re really in tune to that which neighborhoods are full of investors.
Steve Pomeranz: Not to say that there aren’t some beautiful neighborhoods. I mean, I know that they are still building rentals in the South Florida area, and some of these really are really gorgeous.
Terry Story: Absolutely.
Steve Pomeranz: And well-kept.
Terry Story: Correct, and these are managed by well-run companies that care about their properties.
Steve Pomeranz: All right. Go to number nine now.
Terry Story: Number nine, really, secure retirement. For the majority of people, their largest investment is their home, and that’s their nest egg. A lot of people, they’ve been in their home 30 years, 40 years, 50 years. They’ll sell that nest egg and use that money for their retirement and buy something a lot smaller. Move to Florida, buy a small condo in Boca Raton.
Steve Pomeranz: There you go. There you go. My guest as always is Terry Story. Terry is a 28-year veteran with Coldwell Banker located in Boca Raton, Florida, and she can be found at terrystory.com. Thanks, Terry.
Terry Story: Thanks for having me, Steve.
