Falling Cash Supply
Some financial planners or wealth advisors suggest that their clients maintain at least a three month supply of “ emergency ” cash reserves for their clients . More than half of Americans ( or 51 %) surveyed had less than a three months ’ worth of expense supply , according to Bankrate ’ s July 2021 Emergency Savings Survey . This total included 1 in 4 respondents ( or 25 %) who said that they had no emergency cash fund supply at all .
A more recent January 2022 survey conducted by Bankrate found that some 56 % of Americans did not have $ 1,000 in cash savings available to access for emergency expenses . As a result of minimal cash reserves available for many people , they are likely to use credit cards , take out personal or mortgage loans , or borrow funds from family or friends to cover their daily expenses .
Lower cash reserves also adversely affect people who are planning to lease a home . For tenants , they may need enough cash to cover moving expenses and to put up the first and last months ’ rent and / or security deposit money .
For home buyer prospects , they may need at least 3 % to 5 %+ of the proposed purchase price to qualify for the conforming or FHA loans . With the median home nationwide priced near $ 400,000 in the 1st quarter of 2022 , many buyers will need somewhere between $ 12,000 and $ 20,000 for the down payment and additional funds for closing costs unless the seller or other
family members are gifting them some of the funds .
With mortgage rates continuing to rise in recent times , the bigger challenge for many home buyer prospects is coming up with enough of a cash down payment rather than qualifying for a monthly mortgage payment that ’ s a few hundred dollars more per month today than several months ago .
Homeownership Trends
Let ’ s review some eyeopening numbers associated with housing trends across the nation as per the US Census Bureau and Statista :
● The national homeownership rate is 64.8 %.
● There are over 79 million owneroccupied homes in the US as per Statista . Approximately 65 % of homes are owneroccupied and 35 % are rented or vacant .
● Real estate prices have increased at least 73 % nationwide since 2000 .
● An estimated onethird ( 33 %) of all home buyers are firsttime buyers .
Mortgage Debt vs . Unsecured Debt
Debt can be like an anchor holding us back . Yet , some debt is better than others like seen with mortgage debt secured by an appreciating property . Other forms of debt such as unsecured credit cards with annual rates and fees that may be within the 20 % to 30 %+ range can be especially bad . The higher the rate for the debt , the longer it will take to pay it off unless the borrower later files for bankruptcy protection .
The average American has close to $ 6,200 in outstanding or unpaid credit card balances , according to data released by the Federal Reserve and Bankrate . Many borrowers pay the minimum monthly payment . If so , it may take them on average more than 30 years to pay off the credit card balance in full .
With a 30year fixed rate mortgage that may be priced near 3 % to 7 % ( or 20 %+ lower than some credit cards ), the mortgage principal or loan amount decreases as the years go by and the property value is more likely than not to rise as much as the annual published inflation rate . If so , the home value may increase $ 50,000 , $ 100,000 , $ 200,000 , or $ 300,000 + per year , depending upon the region and latest economic trends .
If inflation rates continue at a skyhigh rate , then real estate investments may still be your best option as the purchasing power of the dollar rapidly falls . The future equity gains from real estate will then allow you to pay off consumer debts like credit cards , school loans , and car loans at a faster pace while your net worth compounds and grows .
MEET RICK TOBIN
Rick Tobin has worked in the real estate , financial , investment , and writing fields for the past 30 + years . He ’ s held eight ( 8 ) different real estate , securities , and mortgage brokerage licenses to date and is a graduate of the University of Southern California . He provides creative residential and commercial mortgage solutions for clients across the nation . He ’ s also written college textbooks and real estate licensing courses in most states for the two largest real estate publishers in the nation ; the oldest real estate school in California ; and the first online real estate school in California . Please visit his website at Realloans . com for financing options and his new investment group at SoCal Real Estate Investors for more details .
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