Owning cheaper than renting in almost a third of metro areas

By Sabrina Karl

The average cost to own a home in the 50 largest U.S. metro areas barely ticked up in 2020, while average rents rose considerably more. As a result, it is now cheaper to buy than rent in almost a third of the major markets across the country.

For those following the past year’s housing news, it may seem counterintuitive that the cost to buy remained fairly steady. While it’s true that house prices rose substantially in 2020, mortgage rates meanwhile dropped to historic lows, offsetting the higher home prices with reduced monthly mortgage payments.

The median monthly cost to own a home across all 50 of the largest metro markets inched up to $1,988 in January 2021, just 0.2% above the $1,983 median of a year earlier. Over the same period, the median rent for a two- to four-bedroom apartment across the 50 metros rose 2.4%, from $1,696 in January 2020 to $1,727 this January.

While the nationwide metro cost to own is therefore more than $200 above the average cost to rent, this does not hold up in all of the regions. In 15 of the metros, or 30%, the cost to rent was as much or more as owning. That’s up from 13 such markets a year ago.

In addition, nine more markets registered median home buying costs within just 5% of the average rent.

The five markets where the median cost to own showed the largest discount over renting were Cleveland-Elyria, OH (19% cheaper); Chicago-Naperville-Elgin, IL-IN-WI (14%); Pittsburgh, PA (13%); Riverside-San Bernardino-Ontario, CA (12%); and Miami-Fort Lauderdale-West Palm Beach, FL (11%).

The full list of 15 metros where owning currently costs less than renting, as well as the top 10 where renting is cheaper, can be found at realtor.com in their most recent “Rent vs. Buy” report.

Median home prices and seller profits see 2020 spike

By Sabrina Karl

In 2018 and 2019, median home prices across the country rose between 4 and 5 percent. But over this past historic year, the median home price jumped by about triple that amount, sending seller profits dramatically upwards.

That’s according to new findings from property database firm ATTOM Data Solutions, which released its annual Year-End 2020 U.S. Home Sales Report last week.

The U.S. median home price increased 12.8 percent in 2020, hitting an all-time annual high of $266,250. That dwarfs the increases of 4.4 percent in 2019 and 4.8 percent in 2018, and represents the country’s largest annual increase since at least 2006.

Seller profits were also up significantly, reaching their highest level since at least 2005. Calculated as the difference between the median sales price of sold homes and the median price of those homes at their previous sale, sellers nationwide averaged a home-price gain of almost $69,000. That’s compared to profits of $53,700 in 2019 and $48,500 two years ago.

Calculated as a percentage return on investment, seller profits in 2020 returned almost 35%, up from 29% and 27% returns in 2019 and 2018, respectively. It represents the ninth consecutive year of a housing price boom, which has seen profits increase every year since 2011. It’s also the seventh year of positive profit gains, after housing profits plunged negative from 2008 to 2013 as a result of the Great Recession.

The coronavirus pandemic has wreaked havoc on much of the nation’s economy. But buyers who were relatively unaffected financially, including a segment who sought to move away from harder-hit urban areas, were additionally motivated by historically low mortgage rates due to pandemic-related moves by the Fed. At the same time, the 2020 supply of available homes was suppressed by the pandemic, resulting in substantial upward pressure on prices.

Can money be gifted for a house down payment?

By Sabrina Karl

With first-time homebuyers often struggling to save a down payment, gift money from their family can be a welcome fix. But simply transferring funds from the Bank of Mom & Dad to Johnny’s bank account won’t alone solve the problem. Both giver and recipient need to follow certain gift money rules.

First, the type of mortgage being applied for, as well as the borrower’s credit score, will determine how much personal investment is required in the down payment vs. how much can come as a gift. For instance, FHA loans have different rules on this than conventional mortgages, so the first step is learning the rules for the particular loan and situation.

Also note that down payment gift money must generally come from a family member, such as a parent, grandparent, aunt or uncle, or a sibling. Gifts from friends are typically not allowed, but contributions from a spouse, domestic partner, or fiancee usually are accepted.

Once the allowable gift amount is determined, be aware that all lenders will ask to see 2-3 months of bank statements. So any large, non-routine deposits that show up during that time period will need to be explained and documented.

Specifically, a gift deposited within that 2-3 month window will need to be confirmed with a gift letter from the donor. Most importantly, this letter establishes the relationship of the giver to the recipient and explicitly states that the money provided is being gifted, not loaned, with no expectation of the donor being paid back.

Gift money can be an excellent way to help new buyers get into their first home a little sooner than they would be able to on their own. The trick is simply doing your homework so both giver and lucky recipient can satisfy the lender’s requirements.

How to safely sell buy or sell a home during Covid-19

By Sabrina Karl

The pandemic has caused so many things in our lives to switch from indoor and in-person activities to alternative interactions with less human contact. Home buying and selling is no exception, but it can fortunately be done safely by taking a handful of precautions.

Gone for now is the traditional process of physically touring multiple homes, or meeting to review documents. Instead, safely buying and selling a home during Covid-19 boils down to two changes: 1) do every step you can virtually, and 2) when people coming into the home is unavoidable, substantially reduce the risks of virus spread.

Pre-pandemic, virtual showings were a work-around for out-of-state buyers, or provided as a marketing feature by more sophisticated agents and sellers. But virtual home showings are now the new normal, so if you’re a seller, you’ll need to create a video tour of your home. Fortunately, many real estate agents are well equipped to help you create this.

Going virtual also applies when either party needs to meet with their agent (or each other, if no agents are involved), such as reviewing and discussing documents. In warm weather, it’s possible to handle some of these interactions safely outdoors. But video conferencing for these meetings can be more convenient and safer for everyone, no matter the climate.

At some point, people physically entering the home will most likely be necessary. To minimize risks, in-person viewings should be reserved for the most serious buyers. And of course, masks should always be worn. Other recommended measures are to provide sanitizer and gloves upon entering the home. Additionally, turning on all the lights and opening all doors means fewer human touches.

Lastly, limiting the number of people present at any showings helps reduce risk, as does keeping a social distance between parties at all times.

10 smart times to shop around for home and auto insurance

By Sabrina Karl

Almost no one gets excited about digging up their insurance policy to shop around for better rates. But home and auto insurance is a hefty expense, so it’s worth occasionally reviewing what you’re paying and what rates others are offering. Here are ten great times to do that.

First, there are event triggers, where something has changed in your household situation. Maybe you’ve gotten married or divorced, or are adding a teenager to your policy. These will impact your premium even if you stay with the same agency, so it’s an excellent time to get additional quotes.

Buying a new home or vehicle is also a great time to price-compare. Though it’s a given you’ll have to price out a policy for the new purchase, it’s not a given that you need to stick with your current company, or that you can’t shop around for auto insurance when it’s a home you’ve bought, or vice versa. Use the trigger to shop for both.

Similarly, if you’ve moved, it’s smart to check auto insurance rates from multiple agencies for your new address. Premium calculations take place at the zip code level, so even moving a few communities away can change your pricing.

Changes in your driving or record can also matter. Driving less because you’re working from home or biking to work, or your driving record improving because it’s been three years since you’ve had an accident, can both bring lower premiums.

Beyond these event triggers, it’s also smart to shop around if your home and auto policies are not already bundled with the same company, or because you’re simply looking for ways to cut your family’s expenses.

At a minimum, most experts recommend comparing prices every 1-2 years, and many suggest doing it annually before your policies renew.