20 million American homeowners own their homes outright. No mortgage.

Homeowners With No Mortgage Offer Clues to Recovery
Excerpt:

As federal regulators and banks argue over whether new lending standards will make mortgage credit too tight or too expensive, one important fact about the housing market goes largely overlooked: More than 20 million American homeowners own their homes outright. No mortgage.

This represents just about one third of all homeowners nationwide, according to a new report from Zillow, a real estate information, sales and mortgage website.

Demographics, home prices and geographical location all seem to play into "free-and-clear" home ownership, according to Zillow's survey.

Out of the nation's top 30 housing markets, Pittsburgh, Tampa, New York, Cleveland and Miami had the highest percentage of free-and-clear homeowners. A high number of all-cash, foreign buyers probably plays into New York and Miami. The other cities have relatively low home values, compared to the rest of the nation, making it easier for homeowners to either buy their homes outright or pay off their mortgages more quickly. ([See "free and clear" heatmap in the article].)

Washington, D.C., Atlanta, Las Vegas, Denver and Charlotte had the lowest percentage of homeowners with no mortgage. Las Vegas, hard hit by the housing crash, saw many of its homes go to foreclosure and those homes then go to all-cash investors.

Comment: All of my wife's siblings, one of my siblings and my mother all are "free and clear". One sibling is free and clear on two homes. Another of my siblings will be free and clear within the next six months. Image source is screenshot

Long term home value apppreciation

Home Ownership Was Never a Road to Riches

Excerpt:

Home appreciation nationally has run about 1% above inflation over time.

The big price run-ups from the late 1990s through 2006 or 2007 were an aberration. The biggest value you derive from home ownership isn’t appreciation. “It’s being able to live in it,” Prof. Mayer says, and avoiding the rent you would otherwise have to pay.

Once you add in imputed rent and subtract property taxes, Prof. Mayer estimates, my 2% annual home-ownership return looks more like 6%.

That’s why you should buy as much home as you need—but no more. A bigger home than you need isn’t an investment—it’s an extravagance, the equivalent of renting a bigger apartment than you need. You may choose to do so, but that doesn’t make it a smart move financially.

Another reason home ownership isn’t the road to riches: Most houses—especially the old ones my wife and I favor—are money pits.

Comment: My economic sense tells me that homes should appreciate at approximately the inflation rate.

$ 8000 opportunity for 1st time homebuyers

Get your $8,000 HUD tax credit now

Excerpt:

First-time homebuyers will now have access to quick cash to help them with their down payments.

On Friday, the U.S. Department of Housing and Urban Development (HUD) announced that first-time homebuyers using FHA-approved lenders can now get an advance on the $8,000 tax credit created by the stimulus package and apply it toward their down payments or closing costs.

"We believe this is a real win for everyone," said HUD secretary Shaun Donovan in a speech before the National Association of Homebuilders (NAHB). "Families will now be able to apply their anticipated tax credit toward their home purchase right away. What we're doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing."

As part of the stimulus package, Congress created a refundable first-time homebuyers tax credit in hopes of helping on-the-fence buyers to take the home-purchase plunge. But buyers couldn't collect the $8,000 credit until tax time, rather than at closing time -- when it's needed.

The delay created an obstacle to reigniting the housing market because most first-time buyers -- the ones who would buy much of the available inventory -- have only saved enough to cover 4% of the purchase price, according to the National Association of Realtors.

Comment: I don't think this has ever been available before!

Is buying a home a good investment?

Why Your Mortgage Won't Make You Rich

Excerpt:

Research at the Massachusetts Institute of Technology even suggests home owners may end up earning less over the course of their lives than renters do. The reason? Renters can more easily move for good jobs. It may sound fanciful, but it's not completely ridiculous. Just ask someone who owns a home in Detroit.

I'm not arguing that buying a home is a bad financial move. My wife and I own. But we bought after running the numbers and comparing the annual costs with renting. We didn't gamble on big capital appreciation to help us out.

Nor am I denying the other benfits of ownership. Owning your own place can be a great feeling.

But if you are trying to decide whether to rent or to buy, and you take a purely financial point of view, it's risky to rely on brisk home-price appreciation to swing the argument.

The real benefits of home ownership are any capital appreciation, plus the imputed rent, minus the effective cost of the mortgage and property taxes, other costs, and the return you could earn on your down payment elsewhere.

That's a complex figure, and it varies widely. But if your home's appreciation is lower than the annual cost of borrowing, as it has been for many over the last 20 years, leverage is not much of a friend.

Comment: Short term ownership doesn't work. Long term probably is a good value.