Mortgage Marketing, Mortgage Mindset, Mortgage Product, Mortgage Sales, Random Stuff

The Future Looks Bright for Homeowners and the Next Gen Loan Officer

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June is National Homeownership Month, and it’s a perfect time to talk about why owning a home is a smart financial move. If you’re renting or thinking about buying your first home, you might be wondering about the benefits of homeownership and how to get started. This article will help you understand the financial perks of owning a home and why now might be the best time to buy if you want to see big gains in the future.

The Financial Benefits of Homeownership

Owning a home can be a great investment. Here are some reasons why:

Building Equity: When you own a home, you build equity. Equity is the difference between what your home is worth and what you owe on your mortgage. As you pay off your mortgage, your equity grows. For example, if you buy a home for $500,000 and pay off $100,000 of your mortgage, and your home value increases to $600,000, you now have $200,000 in equity. Remember, you were going to pay rent anyway.

Home Value Appreciation: Home values tend to increase over time. On average, home prices have gone up about 5% per year over the last 20 years, and that would be significantly higher if not for the Great Recession. Shant Banosian recently posted on Instagram that most people buy and live in their homes for at least 10 years. Since 1942, if you bought a home and held it for 10 years, you would have only lost money one year—if you bought a home in 2006. This shows that holding onto a home long-term generally leads to positive financial outcomes, making homeownership a reliable investment. Home values have increased in 77 of the 82 years since 1942.

Tax Benefits: Homeowners can save money on taxes. You can usually deduct mortgage interest and property taxes from your income taxes. Plus, if you’re married and sell your home, you can exclude up to $500,000 of the profit from capital gains taxes.

Example of Home Appreciation

Let’s look at an example of how home appreciation can work in your favor:

  • Home Purchase Price: $500,000
  • Appreciation Rate: Doubling over 10 years (about 7.18% per year)

After 10 years, the home value doubles:

  • Future Home Value: $1,000,000

If you sell your home, you have:

  • Home Equity Gain: $1,000,000 (future value) – $500,000 (initial investment) = $500,000
  • Tax Implications: As a married couple, you can exclude up to $500,000 of capital gains from taxes if the home is your primary residence, so you pay zero taxes on this gain. Unlike many other investments, such as a traditional 401K, where you contribute pre-tax but have no idea how much or at what rate you will be taxed when you need to use the money in the future.

 

 

First-Time Homebuyers

Understanding the local market, schools, and community amenities is crucial to making an informed decision when buying a home. In a recent discussion with a former mortgage executive, they shared some data from looking at thousands of closed purchase clients and hundreds of thousands of internet mortgage leads. They found that almost 75% of leads were from first-time homebuyers, but less than 25% of closings came from them. This suggests that local experts are winning those deals for first-time buyers. First-time buyers made up 32% of all home buyers in 2023, an increase from 26% the previous year. This statistic highlights the growing interest in homeownership among first-time buyers and underscores the importance of being well-prepared and knowledgeable about the home-buying process (Source: National Association of Realtors).

Here are some pro tips that are working right now:

  • The Local Market Expert: Know the ins and outs of the area, including schools and local amenities, and even where to get a gluten-free ribeye.
  • Engage with the Community: Be active on social media and participate in the community both online and in person. Position yourself as a trusted expert and be personable. Be the brand.
  • Win with Your Referral Partners: Collaborate with agents and focus on helping them make more money. The theory of reciprocity suggests you will make more too.
  • Review, Reviews, Reviews: Make sure you have positive reviews on Google and every platform where a client might find you. Your reputation matters.
  • Offer Unique Tools and Services: Provide value to clients early in their journey with tools like FinLocker, first-time buyer courses, and other services that set you apart.
  • Build Relationships: The home-buying process can be stressful. Clients prefer working with someone they trust. Make an effort to connect personally and professionally.
  • Social Proof: Go to your closings, take pictures, and share stories of your clients winning with you.

To succeed, ensure people know who you are, have something unique to offer, and use systems that add value and can guide clients through their home-buying journey over 6-12 months.

Why Homeowners Can Expect Big Gains in the Next 5 Years

The housing market is looking good for homeowners. Here are a few reasons why:

  • Limited Supply of New Homes: Not as many new homes are being built, which means there’s less supply. When supply is low and demand is high, home prices go up. Government data released Thursday showed that housing starts slid by 5.5% last month, coming in at a 1.28 million annualized rate, with building permits – a key gauge of future construction – dropping by 3.8%.
  • Strong Demand: More people want to buy homes. Between the formation of new households and immigration, we are running a deficit of almost a million homes a year, leaving 1 in 3 potential home buyers without a home to purchase.
  • Interest Rates: If and when rates come down in the future, it could create a spree of activity similar to the Covid boom, where those who buy today may see massive increases in values and a chance to possibly save some money through a refinance as a bonus.
  • Inflation: Real estate is a good way to protect against inflation. As prices of goods and services increase, so does the value of real estate.

Conclusion

Owning a home has many financial benefits, from building equity to tax savings. In the mortgage business, we help people achieve the American Dream of homeownership. With the current market conditions, homeowners can expect significant gains over the next five years and become advocates for you. As long as people are renting or thinking about buying a home, there will be plenty of opportunities to help people on their homeownership journey. Homes will never be less expensive than they are right now, and it will never be easier than it is right now to build your brand and stand out from the pack. There are many ways to move forward and only one way to stay the same. The future looks bright for homeowners and the next generation of loan officers.

About 

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John Jurkovich (The Broker Builder)

My name is John Jurkovich aka "The Mortgage Broker Builder". I've been building mortgage companies and running sales teams for the last 3+ Decades. I recently decided it was time to take my knowledge and experience to the world of Bankers And Brokers so we can grow the future of the mini broker!

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