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GOODBYE HOMEOWNERSHIP: WHY THE AMERICAN DREAM MAY BE DEAD AND BURIED AND WITH IT ONE OF THE GREATEST ASSETS YOU CAN HAVE IN YOUR ESTATE

29
Oct

By Jason Stern

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Every single generation of Americans since and including the Great Depression dreamt about homeownership. The difference between those generations and our current generations is that these generations will probably never get to realize the dream of home ownership.

As a NY estate lawyer, probating the estates for many wealthy and working class families in NY I can tell you an awful lot about home ownership. Amongst my wealthier NY estate clients, meaning estates of $10 million or more, real estate makes up approximately 1/3 of their estate assets. As for more modest middle-income families, real estate usually comprises between 70-90% of their estate assets.

NY estate lawyers with extensive experience probating estates will tell you that real estate is one of the greatest assets you can own. Although home ownership is often accompanied by substantial liabilities such as insurance, property taxes, maintenance and mortgages, it is still the greatest investment the individual who is planning their estate can utilize.

Why is homeownership a good NY estate investment?

Historically speaking real estate is a great investment because it appreciates. Like anything else in business it is all about location, location, location. Real estate in the metropolitan area, meaning New York, New Jersey and Connecticut, has seen a 30% spike in value since 2009. In fact, real estate in this region has increased nearly 13% in the past year alone and is primed to rise another 13% in 2014.

Both as a NY estate lawyer and as a homeowner I can attest to both the pride of home ownership, appreciation of the underlying asset, and the immeasurable tax breaks that only home ownership can offer. For example, if you are self employed both property taxes and interest paid on a mortgage are all great tax deductions. Additionally, as you pay down the principal of your mortgage you also build equity in this asset. As an estate asset this equity is afforded a stepped up basis and is excluded from any and all capital gains tax at the time of your death, which can be 20%.

Why homeownership may become history?

You interpret the astounding rise in home values as a booming housing market. However these numbers do not tell the whole story. The existing housing numbers are actually ominous. These housing numbers foreshadow the tale of two cities. The first are the wealthy investors accumulating real estate for speculation at an alarming rate and the second tale of a struggling middle class who are forced to rent. This is the harsh reality of an unhealthy housing market driven up by corporate greed.

This year 60% of all new home sales have been to all cash buyers, most of whom were builders and private equity firms. Perhaps most disturbingly, for the first time in US history home ownership is at a record low of 60% down from 70%. Through their all cash purchases private equity firms are both increasing home prices making it unaffordable for the middle class to purchase homes while keeping inventory low.

As a NY estate lawyer and recent home buyer myself, I can attest to the difficulty in both finding available homes to purchase and the bidding wars that often ensue. This all spells trouble for the individual and their estates.

The first rule of economics is that wealth in any society in transferred in large part through real estate. And without an inventory of affordable real estate for the middle class to purchase, there will not be a middle class. Additionally, if all the desirable existing real estate falls into the hands of private equity firms these firms will be able to create markets, thereby artificially increasing the prices of both future rents and existing homes.

As a NY estate lawyer with extensive experience probating the estates for families like yours, I see the importance of home ownership to both individual families and our economy. Without a vibrant middle class of homeowners American society will never be the same. While home ownership was never guaranteed to anyone it is ingrained in our nation’s fiber that if you work hard home ownership is attainable.

If you or a loved one are thinking about purchasing property or planning their estates, please feel free to call a NY estate lawyer at The Law Offices of Jason W. Stern & Associates for a free consultation at (718) 261-2444. Our Queens estate lawyers have nearly 45 years of combined NY estate law experience drafting and probating the wills for families like yours in the counties of Queens, New York, Kings, Bronx, Westchester, Rockland, Nassau, Orange and Dutchess.