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The Facts
Don’t be swayed by the “doom and gloom” messages surrounding only a few housing markets across the country. The truth of the matter is, there may never be a better time to buy the home you’ve always wanted, right here in beautiful Lancaster County.
Why Lancaster County is resilient
Lancaster County is an industry-diverse community. Our county is made up of manufacturers, construction companies, printing companies, farming enterprises, educational institutions, and retail stores (just to name a few). This diverse workforce makes us a stable area in which to live because we aren’t relying on only a few employers to sustain our community.
Homes are affordable. Even during the housing boom, homes appreciated at a steady rate ― and this steadiness has also helped during the recession we’re experiencing. Just as our community didn’t feel the skyrocketing home prices that other regions in the country did, we also are not experiencing plummeting home values either. Furthermore, our communities have lower real estate taxes and homeowners’ insurance rates than most.
Additionally, Lancaster County holds many higher educational institutions that employ those who live within our community and attract students. And unemployment in Lancaster as of April 2009 was 7.3%, which is lower than the 7.8% reported by the Commonwealth of Pennsylvania or the 8.9% unemployment rate nationally. To view stats, click here...
Where the housing market is hurting
In reality, home values have plummeted and foreclosures have skyrocketed in only a few pockets of the United States ― California, Arizona, Michigan, Florida, Washington, D.C., and the Boston metro areas ― and this is where the media has focused their attention.
Lancaster County is not one of those areas; we are resilient. Over the years, our homes have appreciated at a steady pace. In fact, even during the height of the housing boom, our homes were still appreciating at a balanced speed ― not too fast, not too slow. It is this steadfastness that will keep our home values shielded from the extreme ups and downs that other areas are experiencing.
This buyer’s market is full of deals
If you are looking to buy a new home, many builders are offering great incentives ― from seller’s assistance to sell your current home, to discounted options. Similarly, if you want to purchase an existing home, many home sellers are also making attractive offers so to “move” their homes. You, as the buyer, have some room to negotiate to get the home that fits your needs.
Interest rates are great
Another truth is, interest rates can’t get much lower than where they are today. Looking back just three years to the height of the home buying boom, interest rates were around 6.5% ― and that was considered good. Going back even further to the 1980s, interest rates were in the double digits. These numbers show how ripe the current market is for buying a home. To see for yourself, click here...
Mortgage basics
A mortgage is a long-term loan that uses real estate as collateral. A mortgage loan is commonly used for buying a home. Mortgage loans are usually fully amortizing, which means that the monthly principal and interest payment will pay off the loan in the number of payments stipulated on the note. Mortgage loans are also described by the length of time for repayment, such as 15, 30, or 40 years, and whether the interest rate is fixed or adjustable. Mortgage loans where the down payment is less than 20% usually require private mortgage insurance (PMI) or government insurance or guarantee. To read more on mortgage basics, click here... (PDF)
Home ownership tax advantages
Buying a home is one of the smartest purchases you can ever make. One reason is that homeownership has many positive tax implications. The three most important sources of tax savings for homeownersare:
- deductions for mortgage interest
- deductions for real estate taxes
- capital gain exclusion for the sale of a principal residence
The deductions for mortgage interest and real estate taxes reduce the annual cost of homeownership by reducing the homeowner’s tax liability each year. For example, a homeowner with $10,000 in annual mortgage interest payments and real estate taxes, who falls in the 25 percent tax bracket, could realize up to $2,500 in tax savings each year. Homeowners who itemize their taxes can deduct from taxable income interest allocable to a first or second home for up to $1 million of mortgage debt and $100,000 of home equity loans. And most state and local taxes paid on homes are also deductible.
When the home is sold, the capital gains exclusion can again provide homeowners a tax benefit. Under present law, sellers of a principal residence can exclude from taxation profits the sale of a home, up to $500,000 for married taxpayers and $250,000 for single taxpayers. With capital gains tax rates expected to increase from 15 to 20 percent in coming years, these tax savings can be substantial.
Research by economists at the National Association of Home Builders (NAHB) has estimated the tax savings for homeowners for certain income and mortgage amounts. For a married couple with an income of $80,000 per year and an initial mortgage amount of $250,000, the tax savings from the mortgage interest and real estate tax deductions are estimated to save the couple more than $11,000 in the first five years of homeownership. Assuming the couple owns the home for twelve years, these savings grow to more than $25,000 over the time period. Combined with the capital gains exclusion, the total tax savings for the entire period of ownership exceeds $52,000.
For a couple with an income of $60,000 and an initial mortgage of $180,000, the five years tax savings total more than $6,000, and the total savings over a twelve-year period are estimated to be more than $33,000.
Combined with the current $8,000 first-time home buyer tax credit (www.federalhousingtaxcredit.com), available for qualified purchases on or after January 1, 2009, and before December 1, 2009, the tax savings from homeownership make buying a home today a rewarding financial decision.
For more estimates of the tax savings of homeownership, check out the NAHB’s “Opportunity Knocks” brochure. (Source: NAHB)