This week’s Q&A column is written by Ann McClure of McEnearney Associates Realtors®, the leading real estate firm in Alexandria. To learn more about this article and relevant market news, contact Ann at 301-367-5098 or email [email protected]. You may also submit your questions to McEnearney Associates via email for response in future columns.
Question: What is the top contributor to household wealth?
Answer: The top contributor to wealth in the United States IS homeownership, according to the National Association of REALTORS®. Unsure of taking your statistics from a trade organization? Well, U.S. Census researchers found that the biggest determinants of household wealth are owning a home, followed by a retirement account.
Visit the most recent “Survey of Consumer Finances” conducted every three years (last in 2019) by the Board of Governors of the Federal Reserve System — a federal agency and HQ of the nation’s central bank. They’re tasked with surveying the public to gain an understanding of the financial condition of U.S. households and to study the effects of our ever-changing economy. They consistently share data that the net worth of a homeowner is more than 40x greater than that of a renter!
No matter where you look, the data unwaveringly shows that buying starts most consumers on a path toward financial freedom. Of course, there are other ways — but buying property “forces” an owner into saving. As a homeowner makes their mortgage payment each month, they slowly realize gains in equity. While markets do ebb and flow, holding a property for long enough also means realizing gains in equity as values rise.
But, buying a home can be ridiculously challenging in our region. A buyer must go in with eyes wide open and a good strategy to make the most of this herculean effort. The good news? Buying is not impossible. The equity gains and tax write-offs start early on in ownership and continue. Plus, in a pandemic year when people want more control of their space, it may now even be among the strategies for staying healthier — who knew that would be a benefit of homeownership?
So, what does a buying strategy look like? The founder of McEnearney Associates, John McEnearney said that the three most important things to consider when buying are: Location, location, location. Buy where others want to buy or where you see upward trends. Yes, that means competition, but once in, it means greater gains.
Look at Alexandria and Arlington right now — the “Amazon Effect” has made inventory a trickle of what it once was (in fact, to look at it graphically, the stranglehold following the November 2018 announcement about HQ2 is very obvious). There’s a mad scramble of contract activity for good property. Imagine throwing breadcrumbs into an over-crowded duck pond and be careful not to lose your hand!
Start by meeting with a good realtor and locally-based loan officer (personally, I believe in the power of referrals to locally-based businesses — ask friends and family who they used). Read, listen and learn. Buying a home is a process, like anything else, and there are LOTS of moving parts.
Carefully analyze your income. Consider not only the mortgage, but potential maintenance or repair costs and rising utility and property tax costs. When meeting with a loan officer, instead of asking what you’re approved to purchase, back into the numbers — share what you’re comfortable paying monthly and then see what that, paired with your down payment, will buy you.
Think about your lifestyle… Consider commuting options and travel along with nearby major arteries/transportation hubs. While traffic is less than it used to be, it’s still a big factor. Do you like to be closer to the city and able to mosey over to the local coffee shop to enjoy a socially-distant cup of java with friends? Maybe you enjoy birdsong while looking over a generous lawn and watching the sun rise and deer meander. Don’t buy where you’ll hate living — trust your instincts. Stats and facts are great, but you need to like living there and coming home to what makes you feel happy and restored.
I’ve heard it argued that buying means a loss of freedom — you can’t just pick up and go. What’s great about owning in Northern Virginia and the D.C. Metro area is that you often CAN just pick up and go. We’re in a very transient area — people come and go all the time — whether that means a need for short-term rentals, or the longer-term lease…
Contractors, military, state department, researchers and others move here regularly and need housing. What if the little condo you bought becomes a money-making investment for you while you channel your inner David Letterman and leave the big city for a fly-fishing adventure in Whitefish, Montana?
Buying is good. The process is hard, but worth it. It gives you options and financial freedom and that investment in your future is nearly priceless!
Ann McClure is a licensed real estate agent in Virginia and Maryland with McEnearney Associates, Inc. If you would like more information on selling or buying in today’s complex market, contact Ann at 301-367-5098 or visit her website AnnMcClure.com.
If you would like a question answered in our weekly column or to set up an appointment with one of our Associates, please email: [email protected] or call 703-549-9292.
McEnearney Associates Realtors®, 109 S. Pitt Street, Alexandria, VA 22314. www.McEnearney.com Equal Housing Opportunity. #WeAreAlexandria