The Columbia SC home ownership rate has dropped to 65 percent according to the US Census Bureau. This is after holding above 66 percent for the past three quarters. The last time the rate was this low, former President Bill Clinton was in office serving his second term.
With the nationwide home ownership rate also at 65% and home values increasing, the housing industry and consumer groups are pressuring lawmakers to make the American Dream more accessible to the masses. Advocates are pushing for new mortgage standards crafted to prevent another crash.
The question is, will Columbia SC home ownership fall even further before the rate begins to turn upward?
Real estate analyst Jason Meister, former Fannie Mae executive Tim Rood and Fox Business News’ Neil Cavuto talk about the state of the housing market in this short video report.
The dream of Columbia SC homeownership appears to be fading, according to a recent poll by Harris Poll conducted on behalf of the the National Endowment for Financial Education (NEFE).
50 percent of American adults say their top financial goal is having enough money for retirement. In fact, the percentage of people who cite having enough money for retirement as their top financial goal is on the rise since the recession. In 2011, when NEFE asked American adults the same question, 47 percent said having enough money for retirement was their top financial goal.
In 2011, 17 percent said homeownership was their most-important financial goal, compared to just 13 percent in the latest findings.
Biggest Barrier to Columbia SC Homeownership
There are barriers that limit people from reaching their goals, with 63 percent citing the inability to save enough as an obstacle (compared to 70 percent in 2011) and 47 percent stating that managing debt is a hindrance (compared to 54 percent in 2011).
In addition to not having enough cash for a down payment, tighter credit standards are keeping many first-time buyers out of Columbia SC homeownership.
According to the National Association of Realtors, the average accepted credit score on conventional mortgages is about 720. A credit score that would have gotten you a mortgage before 2008 is now below the average rejection score. The problem is overly restrictive mortgage lending standards, relying on arbitrarily high credit scores. Although this appears to be easing back somewhat, scores still must be considerably higher today for a borrower to realize the dream of Columbia SC homeownership.
Besides the affordability of Columbia SC homeownership, the thing that is attracting new investors and first time buyers into the home buying market are steadily increasing rents. Strong rental growth is happening in both the single-family market and the multifamily apartment market. Average U.S. rents are predicted to continue increasing at a rate of about 4% annually for some years to come although the inflation rate currently stands at 2.9%.
The cost of Columbia SC homeownership continues to rise, and is now partly to blame for the recent housing woes.
It had been thought that home sales had slowed due to unusual winter weather in many parts of the country, but buyers seem to be contradicting that theory now that spring has arrived.
According to an analysis by RealtyTrac, the average monthly payment for a three-bedroom home purchased in the fourth quarter of 2013 shot up by 21 percent in the past year. The calculation includes the estimated cost of a mortgage, homeowners insurance, property taxes and maintenance and subtracts the estimated income tax benefit.
Average Cost of Columbia SC Homeownership Still Cheaper Than Renting
The average monthly house payment for a three-bedroom home in the 325 counties included in the analysis was $865 in the fourth quarter of 2013, based on a 30-year fixed rate mortgage with an interest rate of 4.46 percent and a 20-percent down payment. That's up from $714 for the same size home in the fourth quarter of 2012, using an interest rate of 3.35 percent.
The rise is due to median home price increases of 10 percent in the 325 counties, along with that increase in the average 30-year fixed mortgage rate, as reported by Freddie Mac.
The danger in the affordability statistics is that median monthly incomes (the minimum income needed to qualify for a median-priced home) are not keeping pace with the rising cost of homes. Even with the increase in the cost of Columbia SC homeownership with a mortgage, it's still cheaper to own here and in 91 percent of the counties analyzed than it is to rent a three-bedroom home.
Check out our other articles and news affecting Columbia SC homeownership and the Columbia SC real estate market in general by clicking on the Columbia SC Real Estate News link to your right under Columbia SC Real Estate Categories.
Tax advantages of owning a Columbia SC home are probably not the number one motivating force behind buying a home. But the tax advantages associated with owning your own home are significant, and may be a factor in your decision to buy a home.
Mortgage Interest Deduction
If you itemize deductions you’re generally able to deduct the interest you pay on debt resulting from a loan used to buy, build, or improve your principal residence, provided that the loan is secured by your Columbia SC home.
The ability to deduct mortgage interest also generally applies to second homes, though special rules apply if you rent the home out for part of the year. Interest you pay on up to $1 million in mortgage debt ($500,000 if you’re married and file a separate federal income tax return) can qualify for the deduction (different rules may apply if you incurred the debt prior to October 14, 1987).
Interest on qualifying home equity debt of up to $100,000 ($50,000 for married individuals filing separately) is generally deductible regardless of how the loan proceeds are used. If you’re subject to the alternative minimum tax (AMT), the AMT calculation doesn’t allow a deduction for interest on debt that’s not used to buy, build, or improve your Columbia SC home.
Qualified mortgage insurance premium payments made prior to 2012 can be deducted in the same manner as qualified mortgage interest, provided the mortgage insurance contract is issued after 2006. Congress is debating this tax deductible interest subject, and have been for several years. Each year, the possibility of this valuable deduction evaporating becomes more and more possible.
Could the mortgage interest deduction ultimately be eliminated? That seems unlikely, but elimination or reduction of the deduction has remained part of the ongoing debate, and was included among the recommendations contained in the National Commission on Fiscal Responsibility and Reform’s December 2010 report.
Deduction for Property Taxes
If you itemize deductions, in most cases, you can deduct the real estate taxes you pay on your Columbia SC home in the year you pay them to the taxing authority. If you pay your real estate taxes through an escrow account, you can only deduct the real estate taxes actually paid by your lender from the escrow account during the year. For purposes of calculating the AMT, however, no deduction for state and local taxes, including any real estate tax, is allowed.
Capital Gains on Your Columbia SC Home
If you sell your Columbia SC home at a gain, you may be able to exclude some or all of the gain from federal income tax. For the most part, capital gain (or loss) on the sale of your principal residence equals the sale price of the home less your adjusted basis in the property. Your adjusted basis is the cost of the property (i.e., what you paid for it), plus amounts paid for capital improvements, less any depreciation and casualty losses claimed for tax purposes.
If you meet all requirements, you can exclude from federal income tax up to $250,000 ($500,000 if you’re married and file a joint federal income tax return) of any capital gain that results from the sale of your Columbia SC home. This exclusion can be used only once every two years. To qualify for the exclusion, you must have owned and used the home as your principal residence for a total of two out of the five years before the sale. If you fail the two-out-of-five-year test, you might still be able to exclude part of your gain if your Columbia SC home sale is due to a change in place of employment, health reasons, or certain other unforeseen circumstances.
Special rules apply in a number of situations, including one in which you maintained a home office for tax purposes or otherwise used your home for business purposes. Special rules may also apply if you are a member of the uniformed services. Check with a tax professional about current laws that may affect the tax advantages of owning a Columbia SC home.
For more on current tax laws, visit the IRS website.
There are certainly more than 5 benefits to owning a Columbia SC home. Yet some first-time buyers are skeptical of buying a home with the uncertainty surrounding the housing market.
The uncertainty many refer to when talking about the housing market involves the magic date when home values will start to increase again. Since no one knows when this may occur, the word uncertainty (when paired with the housing market) often reveals a negative connotation.
These are just 5 of the many reasons for buying a home this year:
Appreciation – Buying a home now (at current interest rates) can almost ensure your home’s appreciation in the future. Mortgage rates have never been lower and home prices in many parts of the country are down. This is the perfect recipe for home appreciation. In addition, many foreclosed homes are available for a fraction of the original cost. This can translate to a higher profit if you decide to sell once the market rebounds.
Property Tax Deductions – Real estate property taxes for a primary home and vacation home are fully tax deductible. The IRS provides detailed tax information for first-time buyers that may answer many questions about what deductions homeowners are eligible for.
Preferential Tax Treatment – If you own your home for more than a year and receive more profit than the allowable exclusion after the sale of your home, the profit will be considered a capital asset. Capital assets are given preferential tax treatment.
Building Equity – Many factors such as credit qualification, loan flexibility, and annual percentage rate (APR) contribute to the final decision of what type of mortgage loan best fits your goals. Yet, a new trend being used by some homeowners is to actually add money to their monthly payment to decrease the principal balance of their loans at a much faster pace. This trend is called equity building. Equity builders usually select a home loan with a lower interest rate (and a shorter term loan such as a 15-year fixed) to help build equity faster. This rapid payment process allows borrowers to:
- Pay off the principal balance faster
- Lock in near-record-low interest rates
- Shorten the length of their home loan
- Own their home faster
- Pay substantially less mortgage interest
Home equity is the largest single source of household wealth for most Americans.
Pride – Homeownership offers many benefits to many different types of people. For some homeowners, playing their music as loud as they want and painting the walls the color of their choice is a perk. For others, homeownership will permit them to build an NBA regulation size basketball court on their own property. For others, home ownership may allow them to build the indoor swimming pool of their dreams. No matter who you are, homeownership is a purchase, commitment, and journey that’s sure to bring you pride.
When the uncertainty surrounding the Columbia SC housing market fades and the market rebounds, homeownership may in fact transform that pride of ownership into profit through selling your little corner of the world.