Here is a very good posting taken from www.newhomeguide.com that spells out the advantages of investing in a brand new home versus buying a used home.
Advantages of Buying New
While owning a resale home holds great appeal for some, more and more home buyers are choosing to build their new dream home. Here are just a few reasons why your next home may be brand new:
Ease of Maintenance
New homes don't require as much upkeep as an older home. Many home buyers are finding they want to spend more time on valuable weekends with family and friends than performing home repair. And some home buyers just find they don't have the necessary skills to perform do-it-yourself maintenance and would prefer to live in a home that doesn't require those skills.
Customization
Of great appeal to many a new home buyer is the thought of making their home truly reflect their tastes and lifestyle. From the moment they walk in the door, the home feels like their own as they chose every paint color, cabinet, countertop, carpet, plumbing and lighting fixture.
Community
A community of new homes allows for the planned devlopment of that community. Whether it be active adults, families with young children or golf and tennis enthusiasts, new home buyers know they'll immediately have something in common with their neighbors when they move in.
Floor Plan for Today's Living
Buying a resale home typically means you're stuck with that home's layout (as most don't have stacks of cash sitting around for major renovation projects) that has a design appropriate for 10, 20, even 50 years ago. Today's homes reflect the changing lifestyles of home owners with amenities like more open kitchens, cable jacks throughout the house, more plentiful outlets, etc.
Energy Efficiency
The materials used in today's home are far more effective at reducing energy costs than resale homes. The savings provided in utility bills can quickly offset the price of a new home. (editors note: One study estimates that today's new homes are as much as 30% more energy efficient than homes built just 30 years ago!)
Safety
In addition to less energy efficient materials, older homes can have hazardous materials like asbestos, lead-based paint or faulty wiring contained within them. A new home is subject to the current building codes that require more stringent safety requirements regarding materials or severe weather.
Technology
Retrofitting older homes with today's technology can be an exercise in frustration and futility. They just weren't designed with those items in mind (and to be fair, it's hard to design for something that didn't exist at the time). It's significantly easier to add wiring for surround sound speakers or wired or wireless internet access to a new home while it's being framed.
Warranties & Customer Service
New homes will often come with a complete warranty that covers everything on the house, inside and out. While warranties are available for resale homes, they're typically for only for one year from the purchase date and only cover specific items in the home. A new home can have a much longer warranty and provide more options when something goes wrong.
Friday, June 20, 2008
Sunday, June 8, 2008
Couple Discover More than Value at Lakewood Prairie
Patrice and Jerry Conley are extremely glad they decided to have Lakewood Homes build their first new construction home at Lakewood Prairie in Joliet. This couple was nearing a decision on their purchase of a new single-family home last summer when they decided to make one last stop and check out what Lakewood had to offer. Jerry and Patrice immediately recognized the value that Lakewood is famous for and also appreciated the genuine interest Lakewood’s personnel took in them, factors that led them to choose Lakewood as their builder of choice.
Lakewood Prairie is a clubhouse community featuring 551 single-family homes priced from the low $230s along with 214 attached style Country Homes, starting in the $180s. Fully decorated and furnished models are open for tours everyday.
“It was in July of last year that we stopped by and took a look around Lakewood Prairie. We wanted to stay in the southwest suburbs and thought we should see what Lakewood had to offer. I was impressed with the amount of square footage you get forthe money and also by the salespeople, who really cared about what we were looking for and about our needs. When it came time to make our decision, there was no way Jerry and I could say no, so we went with Lakewood,” Patrice said.
Lakewood Prairie has been a best selling community, attracting buyers like the Conleys, in part because it offers a great selection of 11 different single-family floor plans ranging in size from over 1,600 up to approximately 4,000 square feet. There are four Classic Series homes, priced from the low $230s that feature two-story layouts with three to four bedrooms, 2-1/2 baths, luxury master suites with walk-in closets and private baths, basements and attached two-car garages.
There are also seven impressive Executive Series homes at Lakewood Prairie, starting in the $260s. These home designs are ideal for move-up buyers, growing families or people with a related living situation. The Executive Series are two-story plans with up to six bedrooms, up to four baths, luxury master bedroom suites with private baths and one or more walk-in closets, dens, second floor family rooms (per plan), basements and two or three-car attached garages.
Lakewood also offers its unique Country Home Series at this community. Country Homes are attached single-family designs with the look and feel of a traditionalsingle-family home. The Country Homes range in size from 1,250 to nearly 1,900 square feet, with prices starting in the $180s. There are beautifully decorated and fully furnished models highlighting plans from all series that are open for tours everyday at Lakewood Prairie.
Even though Patrice and Jerry’s children are grown and living away from home, this couple wanted to find a single-family home that would give them much more space than their townhome in Bolingbrook had. They concentrated their search on the Executive Series homes at Lakewood Prairie and settled on the Jefferson model, a popular choice for many buyers because of its open layout and great value.
“We wanted room to spread out, with an open floor plan and at least three bedrooms. We both liked the openness of the Jefferson and the overall flow of this plan. We were also very excited to be purchasing new construction,” said Patrice.
The Jefferson is a comfortable 2,351 square foot two-story, with four bedrooms, 2-1/2 baths and a two-car attached garage. This home highlights formal living and dining rooms, a two-story entry foyer, a corner den and a very open kitchen, breakfast area and family room configuration. The kitchen features a pantry, center island and built-in planning desk.
Upstairs, the Jefferson showcases three secondary bedrooms and a luxury master suite with a deep walk-in closet and a private full bath. The bedroom closest to the top of the stairs can be converted into a loft, an option the Conleys chose in their Jefferson. The couple’s new home also sports oak rails on the stairway and an expanded kitchen with deluxe black appliances and countertops plus beautiful kitchen cabinets with crown moulding.
The Conleys also selected elegant French door that lead into the den, a full basement and a deluxe master bath with a dual bowl vanity, separate shower and a corner whirlpool tub. The couple plans on using their loft space as a mini home theater and video game area, with the two secondary bedrooms reserved for when their children visit or for other guests. The basement is where Jerry can play with his RC cars and other ‘toys’, while Patrice plans on setting up a wet bar and game tables on the other side. Their home has a charming brick front elevation with decorative shutters and a covered front entryway and sits on a quiet cul-de-sac home site that backs to open space.
Aside from getting a new home that had everything they could have dreamed of, the Conleys also received something equally important from Lakewood: highly personalized and responsive customer service. Patrice says that all their questions were answered thoroughly and honestly and that she and Jerry always felt welcomed every time they stopped by to check on the progress of their home.
“What really impressed us was the genuine interest in what was going on in our lives that Lakewood’s salespeople took in us. I really feel we developed a close personal relationship with them during the purchase and construction of our new home and it gave us a great feeling, knowing we didn’t have to worry about anything,” she said.
The private resident clubhouse at Lakewood Prairie will be a popular spot for the Conley’s nieces and nephews when they come to visit. This facility has an outdoor pool with sundeck along with a toddler pool, tennis and sand volleyball courts. Inside, the clubhouse has a furnished great room with a big screen television, fireplace and kitchen.
There’s so much that Jerry and Patrice enjoy about their new home at Lakewood Prairie and because they had such a wonderful experience with the company, they have already told many of their friends and acquaintances to consider a Lakewood home.
“Our experience has been great and as our first single-family home purchase, we love the privacy we now have and enjoy living in a great neighborhood in a growing area. We are proud to be Lakewood homeowners,” Patrice said.
Lakewood Prairie is located on Ridge Road, one mile south of Caton Farm Road in Joliet. To visit, take Route 59 to Caton Farm Road west four miles to Ridge Road, one mile south to the community on the left. The sales center is open daily from 10 a.m. to 5 p.m. or by appointment. For more information, call 1-815-439-5777 or visit www.lakewoodhomes.com.
Lakewood Prairie is a clubhouse community featuring 551 single-family homes priced from the low $230s along with 214 attached style Country Homes, starting in the $180s. Fully decorated and furnished models are open for tours everyday.
“It was in July of last year that we stopped by and took a look around Lakewood Prairie. We wanted to stay in the southwest suburbs and thought we should see what Lakewood had to offer. I was impressed with the amount of square footage you get forthe money and also by the salespeople, who really cared about what we were looking for and about our needs. When it came time to make our decision, there was no way Jerry and I could say no, so we went with Lakewood,” Patrice said.
Lakewood Prairie has been a best selling community, attracting buyers like the Conleys, in part because it offers a great selection of 11 different single-family floor plans ranging in size from over 1,600 up to approximately 4,000 square feet. There are four Classic Series homes, priced from the low $230s that feature two-story layouts with three to four bedrooms, 2-1/2 baths, luxury master suites with walk-in closets and private baths, basements and attached two-car garages.
There are also seven impressive Executive Series homes at Lakewood Prairie, starting in the $260s. These home designs are ideal for move-up buyers, growing families or people with a related living situation. The Executive Series are two-story plans with up to six bedrooms, up to four baths, luxury master bedroom suites with private baths and one or more walk-in closets, dens, second floor family rooms (per plan), basements and two or three-car attached garages.
Lakewood also offers its unique Country Home Series at this community. Country Homes are attached single-family designs with the look and feel of a traditionalsingle-family home. The Country Homes range in size from 1,250 to nearly 1,900 square feet, with prices starting in the $180s. There are beautifully decorated and fully furnished models highlighting plans from all series that are open for tours everyday at Lakewood Prairie.
Even though Patrice and Jerry’s children are grown and living away from home, this couple wanted to find a single-family home that would give them much more space than their townhome in Bolingbrook had. They concentrated their search on the Executive Series homes at Lakewood Prairie and settled on the Jefferson model, a popular choice for many buyers because of its open layout and great value.
“We wanted room to spread out, with an open floor plan and at least three bedrooms. We both liked the openness of the Jefferson and the overall flow of this plan. We were also very excited to be purchasing new construction,” said Patrice.
The Jefferson is a comfortable 2,351 square foot two-story, with four bedrooms, 2-1/2 baths and a two-car attached garage. This home highlights formal living and dining rooms, a two-story entry foyer, a corner den and a very open kitchen, breakfast area and family room configuration. The kitchen features a pantry, center island and built-in planning desk.
Upstairs, the Jefferson showcases three secondary bedrooms and a luxury master suite with a deep walk-in closet and a private full bath. The bedroom closest to the top of the stairs can be converted into a loft, an option the Conleys chose in their Jefferson. The couple’s new home also sports oak rails on the stairway and an expanded kitchen with deluxe black appliances and countertops plus beautiful kitchen cabinets with crown moulding.
The Conleys also selected elegant French door that lead into the den, a full basement and a deluxe master bath with a dual bowl vanity, separate shower and a corner whirlpool tub. The couple plans on using their loft space as a mini home theater and video game area, with the two secondary bedrooms reserved for when their children visit or for other guests. The basement is where Jerry can play with his RC cars and other ‘toys’, while Patrice plans on setting up a wet bar and game tables on the other side. Their home has a charming brick front elevation with decorative shutters and a covered front entryway and sits on a quiet cul-de-sac home site that backs to open space.
Aside from getting a new home that had everything they could have dreamed of, the Conleys also received something equally important from Lakewood: highly personalized and responsive customer service. Patrice says that all their questions were answered thoroughly and honestly and that she and Jerry always felt welcomed every time they stopped by to check on the progress of their home.
“What really impressed us was the genuine interest in what was going on in our lives that Lakewood’s salespeople took in us. I really feel we developed a close personal relationship with them during the purchase and construction of our new home and it gave us a great feeling, knowing we didn’t have to worry about anything,” she said.
The private resident clubhouse at Lakewood Prairie will be a popular spot for the Conley’s nieces and nephews when they come to visit. This facility has an outdoor pool with sundeck along with a toddler pool, tennis and sand volleyball courts. Inside, the clubhouse has a furnished great room with a big screen television, fireplace and kitchen.
There’s so much that Jerry and Patrice enjoy about their new home at Lakewood Prairie and because they had such a wonderful experience with the company, they have already told many of their friends and acquaintances to consider a Lakewood home.
“Our experience has been great and as our first single-family home purchase, we love the privacy we now have and enjoy living in a great neighborhood in a growing area. We are proud to be Lakewood homeowners,” Patrice said.
Lakewood Prairie is located on Ridge Road, one mile south of Caton Farm Road in Joliet. To visit, take Route 59 to Caton Farm Road west four miles to Ridge Road, one mile south to the community on the left. The sales center is open daily from 10 a.m. to 5 p.m. or by appointment. For more information, call 1-815-439-5777 or visit www.lakewoodhomes.com.
Thursday, June 5, 2008
Perfect Home and Clubhouse Lifestyle at Lakewood Prairie...
Talking to Janice Livingston about the beautiful new home she and her husband Timiko purchased at Lakewood Prairie in Joliet gives you an idea of how pleased she is with the decision to move to this community. The couple was no stranger to Lakewood Homes, having lived at Lakewood Falls in Romeoville for six years. When the time came to move up to a larger home, Lakewood was the obvious choice and Lakewood Prairie had exactly what this couple was hoping to find. Lakewood Prairie is a signature Lakewood Homes clubhouse community that features 551 single-family homes priced from the low $230s and 214 attached style Country Homes, starting in the mid $170s. Fully decorated and furnished models are open for tours everyday.
“We really liked our home at Lakewood Falls, but as my home daycare business had grown, Timiko and I realized that we would have to find a home that would have larger rooms to accommodate our needs. We wanted to remain in the southwest suburbsand Lakewood Prairie had what we wanted, that is, lots of home for the money and a convenient location. Since we already owned a Lakewood Home, we knew the company and felt comfortable with them and their excellent reputation,” Janice said.
Lakewood Prairie has proven to be an extremely popular community, in part because it offers homebuyers 11 different single-family floor plans to choose from that range in size from over 1,600 up to approximately 4,000 square feet. There are four Classic Series homes, priced from the low $230s, with two-story layouts that include three to four bedrooms, 2-1/2 baths, luxury master suites with walk-in closets and private baths, basements and attached two-car garages. There are also seven spacious Executive Series homes at Lakewood Prairie, starting in the $260s.
These large and flexible plans are perfect move-up homes for buyers like the Livingstons who are looking for a larger home for a growing family or that have a related living situation. The Executive Series are two-story plans with up to six bedrooms, up to four baths, luxury master bedroom suites with private baths and one or more walk-in closets, dens, second floor family rooms (per plan), basements and two or three-car attached garages. There are six beautifully decorated and fully furnished models from both Series open for tours everyday at Lakewood Prairie.
It was the larger Executive Series and in particular, the premium Heritage Series plans (which make up the four largest Executive Series homes) that piqued the Livingston’s interest. Janice and Timiko were torn between the Newcastle andProvidence floor plans at Lakewood Prairie and finally decided on the spacious Providence, which they moved into in September. The Providence measures a comfortable 3,573 square feet, with four bedrooms, 2-1/2 baths, first and second floor family rooms, a large basement and a three-car garage as standard. Highlights include an open kitchen, breakfast area and family room at the rear of the first floor (which is one of Janice’s favorite features), a den, a sumptuous master suite with a separate sitting room, his and hers walk-in closets and a private bath with dual bowl vanities.
“What we liked about the Providence was the incredible space in the family room and kitchen area, which is perfect for entertaining and the location of the living room that gives it a more private feel. This plan also had the bigger room sizes we were seeking along with a large basement, where we have our pool table and rec room furnishings, along with our exercise equipment,” said Janice.
The Livingston’s new home indeed has all the space they could ask for. Their 18-year-old son Marquez uses his bedroom and the second floor family room as his private areas, while Jennifer, the couple’s 23-year-old daughter, has room to spare upstairs as well. The fourth bedroom is used as a guest room.
“We have hardwood floors in the living room, hallways and kitchen, along with dark cherry cabinets. We also love the whole house audio system we selected, which pipes music to every room. Timiko and I are planning on putting in a morning bar and loveseat in the master bedroom sitting area, to create a cozy and private space,” Janice said. The Livingstons also have a fireplace in their first floor family room, ceramic tile flooring in the baths and a soaking tub in the master bath. Their home features an elegant brick front and is located a short walk from the community clubhouse.
“The clubhouse is fantastic. In the short time we have lived here, I’ve already used it three times, for a family reunion, a going away party and a picnic,” said Janice. The private resident clubhouse at Lakewood Prairie has an outdoor pool with sundeck along with a toddler pool, tennis and sand volleyball courts. The clubhouse’s furnished great room where Janice has entertained includes a big screen television, fireplace and kitchen. The clubhouse and its recreational amenities are available to all residents who live at the community.
The couple’s second home purchase experience with Lakewood was as good as their first, with their home being delivered on time. “We’re very pleased with our new home and Lakewood has continued to provide us with great service since we moved in,” Janice said. So with a larger home that fits her daycare needs, a friendly neighborhood atmosphere and value that can’t be beat, Timiko and Janice Livingston are very satisfied Lakewood repeat buyers.
“Everyone in our family likes everything about our new home. The size is wonderful and we plan on staying at Lakewood Prairie for a long time. We wouldn’t trade our home for anything,” said Janice.
Lakewood also offers its unique Country Home Series at Lakewood Prairie. Country Homes are attached single-family designs with the look and feel of a traditionalsingle-family home. The Country Homes range in size from 1,250 to nearly 1,900 square feet, with prices starting in the mid $170s. These homes offer the benefits of single-family living with private yards, two-car attached garages and optional basements, along with the affordability and convenience of townhome living.
Lakewood Prairie is located on Ridge Road, one mile south of Caton Farm Road in Joliet. To visit, take Route 59 to Caton Farm Road west four miles to Ridge Road, one mile south to the community on the left. The sales center is open daily from 10 a.m. to 5 p.m. or by appointment.
For more information, call (815) 439-5777 or visit www.lakewoodhomes.com.
“We really liked our home at Lakewood Falls, but as my home daycare business had grown, Timiko and I realized that we would have to find a home that would have larger rooms to accommodate our needs. We wanted to remain in the southwest suburbsand Lakewood Prairie had what we wanted, that is, lots of home for the money and a convenient location. Since we already owned a Lakewood Home, we knew the company and felt comfortable with them and their excellent reputation,” Janice said.
Lakewood Prairie has proven to be an extremely popular community, in part because it offers homebuyers 11 different single-family floor plans to choose from that range in size from over 1,600 up to approximately 4,000 square feet. There are four Classic Series homes, priced from the low $230s, with two-story layouts that include three to four bedrooms, 2-1/2 baths, luxury master suites with walk-in closets and private baths, basements and attached two-car garages. There are also seven spacious Executive Series homes at Lakewood Prairie, starting in the $260s.
These large and flexible plans are perfect move-up homes for buyers like the Livingstons who are looking for a larger home for a growing family or that have a related living situation. The Executive Series are two-story plans with up to six bedrooms, up to four baths, luxury master bedroom suites with private baths and one or more walk-in closets, dens, second floor family rooms (per plan), basements and two or three-car attached garages. There are six beautifully decorated and fully furnished models from both Series open for tours everyday at Lakewood Prairie.
It was the larger Executive Series and in particular, the premium Heritage Series plans (which make up the four largest Executive Series homes) that piqued the Livingston’s interest. Janice and Timiko were torn between the Newcastle andProvidence floor plans at Lakewood Prairie and finally decided on the spacious Providence, which they moved into in September. The Providence measures a comfortable 3,573 square feet, with four bedrooms, 2-1/2 baths, first and second floor family rooms, a large basement and a three-car garage as standard. Highlights include an open kitchen, breakfast area and family room at the rear of the first floor (which is one of Janice’s favorite features), a den, a sumptuous master suite with a separate sitting room, his and hers walk-in closets and a private bath with dual bowl vanities.
“What we liked about the Providence was the incredible space in the family room and kitchen area, which is perfect for entertaining and the location of the living room that gives it a more private feel. This plan also had the bigger room sizes we were seeking along with a large basement, where we have our pool table and rec room furnishings, along with our exercise equipment,” said Janice.
The Livingston’s new home indeed has all the space they could ask for. Their 18-year-old son Marquez uses his bedroom and the second floor family room as his private areas, while Jennifer, the couple’s 23-year-old daughter, has room to spare upstairs as well. The fourth bedroom is used as a guest room.
“We have hardwood floors in the living room, hallways and kitchen, along with dark cherry cabinets. We also love the whole house audio system we selected, which pipes music to every room. Timiko and I are planning on putting in a morning bar and loveseat in the master bedroom sitting area, to create a cozy and private space,” Janice said. The Livingstons also have a fireplace in their first floor family room, ceramic tile flooring in the baths and a soaking tub in the master bath. Their home features an elegant brick front and is located a short walk from the community clubhouse.
“The clubhouse is fantastic. In the short time we have lived here, I’ve already used it three times, for a family reunion, a going away party and a picnic,” said Janice. The private resident clubhouse at Lakewood Prairie has an outdoor pool with sundeck along with a toddler pool, tennis and sand volleyball courts. The clubhouse’s furnished great room where Janice has entertained includes a big screen television, fireplace and kitchen. The clubhouse and its recreational amenities are available to all residents who live at the community.
The couple’s second home purchase experience with Lakewood was as good as their first, with their home being delivered on time. “We’re very pleased with our new home and Lakewood has continued to provide us with great service since we moved in,” Janice said. So with a larger home that fits her daycare needs, a friendly neighborhood atmosphere and value that can’t be beat, Timiko and Janice Livingston are very satisfied Lakewood repeat buyers.
“Everyone in our family likes everything about our new home. The size is wonderful and we plan on staying at Lakewood Prairie for a long time. We wouldn’t trade our home for anything,” said Janice.
Lakewood also offers its unique Country Home Series at Lakewood Prairie. Country Homes are attached single-family designs with the look and feel of a traditionalsingle-family home. The Country Homes range in size from 1,250 to nearly 1,900 square feet, with prices starting in the mid $170s. These homes offer the benefits of single-family living with private yards, two-car attached garages and optional basements, along with the affordability and convenience of townhome living.
Lakewood Prairie is located on Ridge Road, one mile south of Caton Farm Road in Joliet. To visit, take Route 59 to Caton Farm Road west four miles to Ridge Road, one mile south to the community on the left. The sales center is open daily from 10 a.m. to 5 p.m. or by appointment.
For more information, call (815) 439-5777 or visit www.lakewoodhomes.com.
Tuesday, June 3, 2008
News You Can Use
Even Now, Buying Home a Smart Move
BY GREGORY KARP-SPENDING SMART
June 1, 2008 (Article Borrowed from the Chicago Tribune Business Section)
Purchasing a home is generally considered a good way to spend money, but is a declining real estate market the right time to buy? How about housing markets where long-term prices have risen slower than average? What if prices already had a big run-up and haven't fallen much?
Those are all the wrong questions because they focus on changes in house prices, contend Gary Smith and Margaret Smith, authors of the new book "Houseonomics: Why Owning a Home is Still a Great Investment." Buying a home can be a smart move, even if prices stay flat over a long period, say the husband-and-wife team who, respectively, are an economics professor at Pomona College in Claremont, Calif., and president of her own fee-only financial planning firm.
"All people think about is how fast prices go up," Gary Smith said. The more central question is, "How much money can I save on rent?"
The basis of their argument is you have to live somewhere. So you either buy or rent your shelter. If you buy, your house can generate an income, or cash flow. That income, what they call the "home dividend," is equal to the money you save by not renting, plus the tax benefits of having a mortgage, minus the mortgage payments and other homeownership expenses.
Many consumers have considered the rent-savings concept in general, having a vague notion that they're throwing away money on rent. But it looks a lot different, and compelling, when you flesh it out with numbers.
A couple years ago, while many housing experts were screaming about bubble markets, the Smiths were analyzing data and concluding many markets, including Indianapolis, Dallas and Atlanta, were not bubble markets. In fact, houses there, based on their home dividends, were tremendous bargains.
Consider a house in the Indianapolis suburb of Fishers, Ind., that sold for $135,000. Annual rent savings for a comparably sized dwelling totaled $15,000, while the mortgage tax deduction was worth $2,447. Subtract the annual mortgage payments, property taxes, insurance and maintenance, and the new owners were left with a house dividend of $5,622.
That means at the end of the year, the couple who bought that house had that much more in their bank account than if they had rented for that year. Assuming the couple made a 20 percent down payment, their return after the first year was a whopping 21 percent. And the return, compared with renting, increases each year as rents rise.
But the return excludes expenses incurred in buying and selling a home, such as closing costs and real estate agent commissions, because they aren't incurred every year. If the couple stayed in the home a short time, the transaction costs would diminish that return. People who don't itemize their income taxes would not receive the added tax benefit.
The point, though, is that you can have a tremendous investment return from your house that has nothing to do with an increase in its potential sale price.
In fact, the authors say, your house can be your financial engine to prosperity. During working years, a house is a form of forced savings. It's a source of borrowing via equity loans. In retirement, you can use home equity to help pay for retirement by downsizing to a smaller home and pocketing the difference, often tax free. Or you could obtain a reverse mortgage, which provides an income stream. If you pay off the mortgage, you get to live rent-free in retirement.
Indeed, the average homeowner has a net worth of nearly $200,000, while the average renters have a net worth of less than $5,000, according to the Federal Reserve Board's Survey of Consumer Finances. And it's not because homeowners have 40 times the income of renters; they only have about twice as much.
You can calculate your home dividend. Online at http://www.houseonomics.com/, the authors have a calculator, which you can use for free by creating a login.
Home dividends can come out positive or negative. Some will be negative at first but will turn positive as rents go up and rental savings grows, Gary Smith said.
Gregory Karp is a personal finance writer for The Morning Call, a Tribune Co. newspaper in Allentown, Pa. E-mail him at yourmoney @tribune.com. For additional discussion on spending wisely, see the Spending Smart blog at http://blogs.mcall.com/ /spendingsmart.
Copyright © 2008, Chicago Tribune
BY GREGORY KARP-SPENDING SMART
June 1, 2008 (Article Borrowed from the Chicago Tribune Business Section)
Purchasing a home is generally considered a good way to spend money, but is a declining real estate market the right time to buy? How about housing markets where long-term prices have risen slower than average? What if prices already had a big run-up and haven't fallen much?
Those are all the wrong questions because they focus on changes in house prices, contend Gary Smith and Margaret Smith, authors of the new book "Houseonomics: Why Owning a Home is Still a Great Investment." Buying a home can be a smart move, even if prices stay flat over a long period, say the husband-and-wife team who, respectively, are an economics professor at Pomona College in Claremont, Calif., and president of her own fee-only financial planning firm.
"All people think about is how fast prices go up," Gary Smith said. The more central question is, "How much money can I save on rent?"
The basis of their argument is you have to live somewhere. So you either buy or rent your shelter. If you buy, your house can generate an income, or cash flow. That income, what they call the "home dividend," is equal to the money you save by not renting, plus the tax benefits of having a mortgage, minus the mortgage payments and other homeownership expenses.
Many consumers have considered the rent-savings concept in general, having a vague notion that they're throwing away money on rent. But it looks a lot different, and compelling, when you flesh it out with numbers.
A couple years ago, while many housing experts were screaming about bubble markets, the Smiths were analyzing data and concluding many markets, including Indianapolis, Dallas and Atlanta, were not bubble markets. In fact, houses there, based on their home dividends, were tremendous bargains.
Consider a house in the Indianapolis suburb of Fishers, Ind., that sold for $135,000. Annual rent savings for a comparably sized dwelling totaled $15,000, while the mortgage tax deduction was worth $2,447. Subtract the annual mortgage payments, property taxes, insurance and maintenance, and the new owners were left with a house dividend of $5,622.
That means at the end of the year, the couple who bought that house had that much more in their bank account than if they had rented for that year. Assuming the couple made a 20 percent down payment, their return after the first year was a whopping 21 percent. And the return, compared with renting, increases each year as rents rise.
But the return excludes expenses incurred in buying and selling a home, such as closing costs and real estate agent commissions, because they aren't incurred every year. If the couple stayed in the home a short time, the transaction costs would diminish that return. People who don't itemize their income taxes would not receive the added tax benefit.
The point, though, is that you can have a tremendous investment return from your house that has nothing to do with an increase in its potential sale price.
In fact, the authors say, your house can be your financial engine to prosperity. During working years, a house is a form of forced savings. It's a source of borrowing via equity loans. In retirement, you can use home equity to help pay for retirement by downsizing to a smaller home and pocketing the difference, often tax free. Or you could obtain a reverse mortgage, which provides an income stream. If you pay off the mortgage, you get to live rent-free in retirement.
Indeed, the average homeowner has a net worth of nearly $200,000, while the average renters have a net worth of less than $5,000, according to the Federal Reserve Board's Survey of Consumer Finances. And it's not because homeowners have 40 times the income of renters; they only have about twice as much.
You can calculate your home dividend. Online at http://www.houseonomics.com/, the authors have a calculator, which you can use for free by creating a login.
Home dividends can come out positive or negative. Some will be negative at first but will turn positive as rents go up and rental savings grows, Gary Smith said.
Gregory Karp is a personal finance writer for The Morning Call, a Tribune Co. newspaper in Allentown, Pa. E-mail him at yourmoney @tribune.com. For additional discussion on spending wisely, see the Spending Smart blog at http://blogs.mcall.com/ /spendingsmart.
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