RealNews RoundUp
Each week I round-up the best real estate articles and break them down for you in an easy to digest format. Here are the articles I’ve found most interesting over the last couple weeks:
The Article: Keeping Current Matters: Get ready for smaller, more affordable homes
The Highlights: Conditions have been tough for ALL homebuyers lately as they’re contending with low inventory and high interest rates. Affordability is at a 40-year low. As a result, many homebuyers, especially first-time buyers, are setting their sights on smaller homes to offset the affordability hurdles.
The real estate market is extremely seasonal. We all know most homebuying occurs in the spring and early summer and begins to slow toward the end of July through the end of the year, but the size of homes being bought and sold is also seasonal!
Larger homes tend to come on the market during the summer months when households with children who are out of school are looking to move.
Based on historical trends and the fact that fall is now approaching, we can expect smaller, more affordable homes to come to the market throughout the rest of the year.
My Take: This article focused mostly on the seasonality of home sized based sales which I think is interesting and certainly encouraging—especially for first time homebuyers, downsizers, or anyone else looking to buy that isn’t beholden to a school calendar!
What wasn’t touched on enough in my opinion is how home builders are also adjusting to market changes by building smaller homes! Reducing the square footage of a home is a BIG way to keep costs down. Additionally, builders are more affordable finishes to help entry-level buyers.
Anecdotally, PulteGroup said 7,518 homes closed in the second quarter of this year, a 4.8% gain over the last year, and beating estimates of 7,266 homes. First-time buyers made up 41% of homes closed, up from 36% a year ago.
Long story short—homebuyers, take heart! Affordability will improve one way or another.
Article: Norada: Cheapest ways to buy land and build a house
The Highlights: Buying land and building a house offers perks! Some include…
· Being able to customize the design of your home to your specific needs and preferences.
· Using less expensive materials and labor, which can save money.
· Building in a location that you choose rather than being limited to the existing housing stock.
· Building an energy-efficient home, which can save you money on your energy bills.
That said, budgeting for this sort of project can be complex and hard to generalize since factors vary so much based on location, local ordinances, contractor fees, etc.
My Take: I think this article said it best…this sort of thing is WAY too hard to generalize which made this article mostly unhelpful.
Additionally, I don’t think anyone who’s overly concerned about budgeting or cost is building a home. As a rule of thumb, it's always cheaper to buy an existing house than to build one. In 2023, the median price to build a home from scratch is roughly $446,000. And that doesn’t include the price of land, which costs $9,646 per acre, on average in the U.S., but in suburban neighborhoods (like where I live!) can go for upwards of $200,000 just for the lot.
At the end of August, the median sales price of an existing home was just over $406,000. A bargain in comparison!
The perks the article listed are true! But I think the title of the article was misleading. There’s no inexpensive way to build a home from scratch. It’s just not a money-saving endeavor.
The Article: Norada: Rich vs. Poor mindset: Which mindset do you have in 2023?
The Highlights: Besides the big bank accounts, how do the uber rich differ from the rest of us? It’s all about mindset, outlook and behavior! Here are ways the rich differ from the poor:
1. Rich people believe “I create my life”
2. Poor people play the money game on defense rather than offense.
3. The rich are committed to getting rich
4. Rich people think big
5. The rich are bigger than their problems
6. Rich people focus on opportunities
7. The rich focus on a positive attitude
8. Rich don’t flaunt their wealth and live frugally
9. Rich understand the value of education
10. Rich are better at risk management
11. The rich build multiple streams of income
12. Rich believe in saving, investing and multiplying
My Take: This article is onto something! I do think there is a fundamental difference in attitudes surrounding money for the rich as compared to the poor, or even the middle class. But the advice of “have a positive attitude” is over generalized, unspecific, and unhelpful in telling people how to actually shift their mindset and achieve wealth. There were a lot of tips like this throughout the article, so to save you time, I’d encourage you to focus on numbers 8, 11, and 12 which are the most actionable and clear cut of the list. Let’s distill these down a bit:
Frugality: Warren Buffet is one of the world’s richest and most frugal men! If it works for him, it can work for you. Just because you can afford something doesn’t mean you should buy it! Buffett eats mostly at home, buys used cars, but my favorite tip of his is this:
“If you must take out a loan, perhaps get a 30-year mortgage — it’s “the best instrument in the world. If rates go to 2%..., you pay it off. It’s a one-way renegotiation. It is an incredibly attractive instrument for the homeowner, and you’ve got a one-way bet.”
Multiple Streams of Income: Richard Corley, author of “Rich Habits: The Daily Success Habits of Wealthy Individuals”, analyzed IRS data and found that 75% of millionaires have multiple income streams. With money coming in from multiple sources, it’s easier to pay off debt, save for retirement, and build wealth.
I’d also argue that this is most effective when it’s *passive* income. My favorite strategy is through short and long term rental properties. Follow me on Instagram for tons of investment tips and tricks so you can begin earning money while you sit on the couch.
Save, Invest, Multiply: Dave Ramsey’s advice is to save 15% of your household income annually in a high-yield savings account for retirement. Great advice so you won’t be working forever! Equally as important is to find an investment that will earn you passive income. I’m partial to real estate for multiple reasons (watch here here and here for some insights!) or reach out directly to learn more!