The Economic and Emotional Value of Homeownership
By: Arlo Barzee – President
Wilkes – Yadkin Home Builders Association
In good times or bad, there is one constant: Homeownership remains the American Dream for millions of American families. And there are many reasons why, both economic and emotional.
Most Americans consider homeownership to be their single best long-term investment and a primary source of their wealth and financial security. Generations of families have counted on and used the equity in their homes for their children’s education, their own retirement and other milestone expenses.
Individual household budgets are helped by tax incentives that are designed to make owning a home more affordable. Deductions for mortgage interest and property taxes can result in thousands of dollars of tax savings, especially in the early years of the mortgage when interest makes up most of the payment. Home owners save nearly $100 billion annually on mortgage interest and property deductions alone.
And when home owners sell their primary residence, they get an enormous tax break. A couple who owns and lives in their home for two years and then decides to sell can keep up to $500,000 of the profit tax-free, and a single owner can keep $250,000.
A healthy housing industry means more jobs and a stronger U.S. economy. In fact, fully 15 percent of the U.S. economy relies on housing.
Most of the products used in home construction and remodeling are manufactured in the United States. Constructing 100 new homes creates more than 300 full-time jobs, $23.1 million in wage and business income and $8.9 million in federal, state and local tax revenue. New home owners spend money on decorations and furnishings, to enhance the landscaping and to become members of the community by patronizing local businesses and service providers.
Yet a home is so much more than an investment. In good times and in bad, the opportunity to own a home has been a cherished ideal and a source of pride, accomplishment, social stability and peace of mind.
Homeownership strengthens communities as well as families.
Home building increases the property tax base that supports local schools and communities. When a family owns their home, it is an asset that has a direct impact on their financial security and future. People are more likely to take care of things they own so they remain valuable. And a home’s value is determined by how well it is maintained as well as by the condition of the neighborhood it is located in. So home owners have incentive to spend their time and resources improving their neighborhood, even if it is just to protect the value of their investment.
Homeownership builds stronger communities, provides a solid foundation for family and personal achievement and improves the quality of life for millions of people. The Bipartisan Policy Center's Housing Commission has said that homeownership can "produce powerful economic, social, and civic benefits that serve the individual home owner, the larger community and the nation."
It is important to know that despite the fact that housing and homeownership policies over the last century have contributed to the growth of the middle class and helped the United States become the most dynamic economy the world has ever seen, homeownership is under attack. Policymakers are proposing radical changes, including ending the mortgage interest deduction and mandating minimum 20 percent downpayments, that would threaten the dream of homeownership for millions of Americans.
The National Association of Home Builders’ website, www.ProtectHomeownership.com, has more information about the threats to homeownership and how to take action to protect it.
Contact the Wilkes – Yadkin HBA to learn about the latest features available in new homes in the Great State of Wilkes and the Yadkin Valley area.
Beware being your own Home Builder
By Arlo Barzee, President
Home Builders Association of Wilkes & Yadkin County
Homeownership is the foundation of the American Dream, and in today’s do-it-yourself culture where how-to advice for just about anything can be found on the internet, many people think they could save a lot of money by building their own home. But your home is likely the single largest investment you will make in your lifetime, and not hiring a professional home builder could be a costly mistake for many reasons—financial, emotional, and physical.
Getting financing is an important consideration. As a self-contractor, lenders have strict guidelines and limits on how much money they will give you, and they will require that you provide house plans, specifications and an itemized list of documented costs and bids beforehand.
Even if you feel that you have enough cash to do the job, it is wise to get a loan to cover material or labor cost increases, upgrades or material overruns. Many mortgage companies will not lend money to cover unanticipated costs on a home when construction has already begun.
There is a huge amount of bookkeeping if you act as your own general contractor. The IRS requires that you send anyone you hired to work on your home—subcontractors—who earned over a certain amount a 1099 form at the end of the year. You’ll have to be on site to document delivery slips, check for inaccurate billing and track material returns in order to stay on budget.
Professional home builders are experts at the logistics and timing of building a home. It is an exact science to make sure permits are applied for, materials are ordered and delivered, subcontractors are hired, utility deposits are paid, and inspections are scheduled at exactly the right time. Even if you’re very organized, it is a process where many things can go wrong and a delay could cost you thousands of dollars and a lot of stress.
Building your own home is a risky proposition from a legal standpoint, as well. Home builders carry Builder’s Risk, General Liability and Workman's Compensation insurance on their building projects. As a self-contractor, you will have to assume most, if not all, of the same liabilities. You may want to consult with an attorney regarding potential liability issues, and with an insurance agent concerning appropriate insurance coverage.
Home builders have staff to take care of all the details of building a home, and established relationships with other professionals to complete the job, which is why they can build a home in a relatively quick timeframe. To build an average 1,500 sq. ft. home, you need to be prepared to spend at least 35 hours per week for at least five or six months, and most people don’t have jobs with that kind of flexibility. You will also need the time to determine and order the materials, evaluate bids, and hire and schedule qualified, licensed, insured and/or certified subcontractors.
Finally, if you sell the home you’ve built, you may be responsible for any defects that are discovered afterwards. As the home’s builder, you or your estate will be responsible for claims brought by subsequent owners of the home.These are just a few of the things you need to think about before building your own home. By hiring a professional home builder, you will get quality of workmanship, building code compliance and an outstanding level of knowledge. To find a home builder in the [insert market name] area, contact [insert HBA contact information] or go to www.nahb.org/designationsdirectory. Thesew
These are just a few of the things you need to think about before building your own home. By hiring a professional home builder, you will get quality of workmanship, building code compliance and an outstanding level of knowledge.