Americans Prefer Owning to Renting

Owning a home still has more appeal than renting for Americans, according to Fannie Mae. A sign of stability, safety, family and community, home ownership is an essential component of the “American Dream” of success and happiness and has been for many generations. The recent National Housing Survey (Q4, 2011) conducted by Fannie Mae found that this is still true.The majority of those surveyed (at all education and demographic levels) still believe that owning a home is preferable to renting. The study, conducted from over 3,000 interviews, also showed that 64% of the renters surveyed planned on a future home purchase. Most of the survey participants listed high-ranking schools and safety as prime concerns when considering the location of that future home.About 34% of those interviewed felt that “now” is a very good time to buy a home, but only 5% felt it was very likely that they would be purchasing a home in the next 12 months. The majority of survey participants (53%) felt that the housing market was likely to stay the same in the next year, but nearly all realized that the possibility of rental prices decreasing was unlikely. In fact many of those surveyed recognized the possibility of rental prices increasing, with 43% believing rents would increase and 47% believing they would stay the same. The majority of the respondents listed income, amount of down payment or job security as the largest obstacle to home ownership.




Source: Fannie Mae

74% of Homebuyers Can Use CFHomes as a Ladder!

People are different: some people will use City First Homes (CFHomes) to buy a home to live in for generations. In contrast, others may use the program as a "ladder" to traditional homeownership (Although no type of homeownership is really "traditional," we are referring to homeownership where you don't have to share appreciation).  How can CFHomes be their ladder? Well, instead of renting, they live in a CFHome for 5 to 7 years, building up wealth so they can pay the down payment for a traditional home!

74% is the key number.  A recent study was conducted with the Champlain Housing Trust, the nation's largest shared-appreciation housing trust, whose model is similar to CFHomes'.  They followed buyers for 20 years and found:

Among the [Champlain Housing Trust] homeowners whose subsequent housing situations were known, 74% of them bought [traditional] homes within six months of re-selling their limited-equity houses or condominiums; another 5% traded their first resale-restricted home for another, choosing to remain within the [Champlain Housing Trust]. The rest may have returned to renting or other outcomes.

It's also important to note that the average amount of time a Champlain Housing Trust owner lived in their home was only 5 years!  So it did not take them decades to save up to buy a traditional home; it was a relatively short amount of time.

So if you're thinking about homeownership but worried about the costs, why rent when you can use CFHomes as YOUR ladder?  You'll build wealth for the future, get to "practice" being a homeowner, and enjoy the stability and tax benefits of owning a home!

To read the full study, please click here.

City First Homes' work is mentioned on NewsTalk with Bruce DePuyt!

CFHomes' work on preserving the city's first African-American-founded cooperative was mentioned on TBD News Talk recently!  View the following interview with CFHomes' Board Member and Enterprise Community Partners VP and Market Leader, David Bowers - click here!

The mention of CFHomes' work starts at 25:15.



- Sara Giordano

What in the World is Shared Appreciation? (And Why Should I Consider It?)

Shared appreciation. It sounds like you must give up wealth-building. But have you heard the old adage, "In order to receive you must also give?" That's how we see shared appreciation. It's a huge win-win and you definitely gain more than you give.  The long-term trend in most American cities is that housing prices are rising faster than middle-class incomes are rising. 15 years ago, it would have been easier to buy a home on U Street or the Southwest Waterfront, but now, buying a home there is a lot more expensive. CFHomes helps to fight this pattern.  We make homeownership more affordable with a Down Payment Assistance Loan, which lowers monthly and upfront costs.  Each time the home is sold, 75% of the home's "growth in value" will be a direct grant to reduce the home price for the next, CFHomes-eligible buyer of the same property.  As a result, the home stays "permanently affordable!" But the key is, even if you are sharing appreciation, you still build significant wealth.  Let's look at the numbers:  Buying the same $199,900 home*  CFHomes vs. buying with FHA loan vs. buying with Conventional loan with 5% down payment                               CFHomes          FHA          Conventional    Total upfront costs       $3,998          $14,254         $17,253 Total monthly costs      $1,316          $1,529            $1,536 Suppose you decide to sell after 5 years.  Assume the home has grown in value to $231,739; and you sell it for that amount.   After paying back all mortgage loans and sharing 75% appreciation (CFHomes), the seller walks away with:                                   CFHomes        FHA      Conventional                                   $7,007        $34,608       $38,506 However, you must take into account how much moreyou spent on the same home with FHA and Conventional, due to higher monthly and upfront costs: FHA - Spend $22,197 more than CFHomes Conventional - Spend $25,617 more than CFHomes What is the true amount that the seller walks away with at sale, after considering how much more you spend on the same home with FHA and Conventional?                                 CFHomes        FHA      Conventional                                    $7,007         $12,411    $12,889 Bottom Line: When you buy with FHA and Conventional, although you don't share appreciation, you will have to give up some of that money anyway through higher monthly and upfront costs. What CFHomes can offer is homeownership at reduced monthly and upfront costs, and wealth building for your future. *In this example, we use March 2010 interest rates, assume an individual with a 720 credit score, and assume 3% annual home price appreciation. For a detailed explanation of the numbers or to see other cost scenarios, e-mailjyothi@cfhomes.org

5 Things To Consider When Asking, "When Should I Buy a Home?"

Working at City First Homes, I've met many homebuyers who tell us there are very conflicting, contradictory messages out there!

On the one hand, some people proclaim the death of the American Dream of Homeownership, following the 2006 housing crisis.  On the other hand, we hear that due to the recession, interest rates and housing prices are at historical lows.    So where does the truth lie? While we don't have the answers, here are Five Things to Consider If You're Deciding Whether to Buy:

1. Your Credit Score: One of the key factors that determines the interest rate on your mortgage loan is your credit score.  Some homebuyers work to get "minimally acceptable" credit score, so they can qualify for a mortgage loan. But a buyer with a 720 credit score is going to get a better interest rate from a lender, than someone with a 620 credit score.  So if you're thinking about buying a home, consider doing the work needed to improve your credit score.  To fix your credit score, there are sometimes *quick* things you can do (paying off a debt) and sometimes *longer-term* things you can do (like building up a new line of credit).  Luckily for DC homebuyers, the wonderful Homebuyer Education organizations mentioned in a previous post are there to help buyers think through strategies to improve credit.

2. Mortgage Rates: Right now, mortgage rates are lower than they have been in years.  Only a few months ago, in October 2010, as reported by CBS, interest rates reached low levels not seen since the 1970s.  As a result, it may be a good time to lock in a low-interest mortgage loan.  The following graph from Mortgage-X shows trends from the past 20 years.  The red line for "30 Year FRM" (30-Year Fixed Rate Mortgage) represents the most common type of mortgage loan.


Source: http://mortgage-x.com/trends.htm

3. Comparing Home Prices to Rental Prices: With the economy recovering from a recession, average housing prices in the District are lower than they were at the height of the housing bubble. As a previous post discussed, it may currently be cheaper to buy a home versus rent, on average, in Washington, DC.  At the same time, it's important to keep in mind that DC still has one of the strongest housing markets nationwide.


4. Income: When deciding how much money to lend you, banks will look at your monthly income.  The more you make each month, the more "home" you can purchase. For the CFHomes program, homebuyers generally are not allowed to get a mortgage loan that is higher than 35% of their monthly income. In fact, 35% is a common maximum limit for most lenders. So make sure your income is high enough, so you can get the home price you want, and afford a neighborhood you're interested in!  Lenders can give you more information on "how much home" you can currently qualify for.

5. Savings: Buying a home can incur unexpected expenses. Unlike renting, you have to take care of all repairs that may be needed, to make sure your home maintains its value.  If you lose your job, it is harder than renting to simply sell your home. As a result, it's a good rule of thumb to make sure you have savings on hand if you choose to buy a home.

These are just some of the many factors to consider when choosing when to buy a home.

Where does CFHomes come in? At City First Homes, we feel our DC-government launched affordable housing program provides homebuyers with the opportunity to take advantage of historically low interest rates and relatively lower home prices in the District; but at the same time, the program reduces monthly and upfront costs, making homeownership more affordable.

- Jyothi Ramakrishnan

Comparing the Cost of Renting Vs. Buying a Home in Washington, DC

Over at UrbanTurf, there is a post today about the cost of renting versus homeownership in DC.  According to the real estate website Trulia.com, it is still cheaper to buy a home, versus rent, in the District. 


This goes hand in hand with a recent study released by Harvard University and summarized in the Washington Post, indicating that the number of renters "who spend more than half their income on housing is at its highest level in half a century."  According to the study, 26 percent of buyers across the country spend more than half their pre-tax income on renting, and this is largely because incomes have slipped or stagnated.


In high-cost cities like Washington, DC, renting can be hard on the checkbook.  One goal of the City First Homes program is to help people transition from renting to shared-appreciation homeownership.

- Jim Steck

Is it 12 times more expensive to rent vs. buy in DC?

How does renting stack up buying an equivalent home in Washington, DC?

The real estate website Trulia has developed a Rent Versus Buy Index, which is calculated by "using the median list price compared with the median rent on  two-bedroom apartments, condos and townhouses listed on Trulia.com."

According to their data, it is 12 times more expensive to rent versus buy in the District.

Click here to view their interactive map.

- Jyothi Ramakrishnan

Click here to learn more about City First Homes