3 Strategies for the Move-Up Buyer

Moving up to your “forever home” is exciting. When you bought your first place, chances are you were young, strapped for cash and prepared – if not warned – to make some concessions. The move-up buyer typically has some savings and home equity to work with, making this next move feel less like a compromise and more a thoughtful selection.

But move-up buyers face their own set of challenges that call for a carefully considered strategy. Here are three options for the smart move-up buyer with a plan!

The “Sell First” strategy is ideal for the move-up buyer who can’t afford to pay two mortgages simultaneously. Selling your property first eliminates the risk of having to carry two mortgages if you don’t sell your existing home in time. It also reduces the chances of having to reduce your asking price in the interest of speeding up the sale. This is a good option for move-up buyers who are banking on the proceeds of their sale to fund their new (and likely more expensive) property. By selling first, you’ll know exactly how much money you have to purchase your next home.

If homes in your area of choice are selling faster than the ‘For Sale’ signs can hit the front lawn, the “buy first” strategy might be the way to go. By buying your new home before selling your old one, you won’t feel rushed into settling for a sub-par property, or having to seek alternative temporary housing options while you shop the market. This move-up buyer still lives in his or her existing home, allowing them time to shop around, and continue looking until they find that perfect place. This move-up buyer typically requires a bridge mortgage.

When all is said and done, this move-up buyer approach is the most ideal, but getting there is another story. Aligning your purchase and sale closing dates can be tricky. Remember that there are three dancers in this tango – you, the person you’re buying from, and the person you’re selling to. You’ll also have to move out and move in on the same day. In this scenario, time is your best friend and flexibility your savor. This means you’ve planned ahead – you’re researched neighborhoods, gotten pre-approved for a mortgage, and you’ve started the organizing and de-cluttering process before the big move.

The right move-up buyer strategy depends on a number of factors, such as your financial situation, current housing market conditions, your personal comfort level and your personality. Consider all these when making your decision. Plan ahead and work with a pro to ensure a smooth transaction on both sides of the bargaining table.

During my 17 years in the business, I’ve helped many move-up buyers and will be happy to help you and those you know!

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Outdated Advice Buyers Should Ignore

People who have gone through the homebuying process are often eager to give advice. But too often, these so-called insider tips may very well be outdated.

Realtor.com® recently highlighted some of the most common advice home buyers may hear from their peers that no longer applies in the current housing market, including:

“Wait for spring.”

Buyers shouldn’t feel like they’ll be at an advantage if they wait for the busiest season in real estate—it may be the opposite, real estate pros say. “Yes, there’s more inventory [in the spring], but there’s more competition for it, and sellers are more optimistic about getting a higher price then and so less willing to negotiate,” Sebastian “Seb” Frey, a real estate broker in the Silicon Valley area, told realtor.com®. “Buy when you find the right property that will meet your needs for today—and the next five to 10 years.”

“Wait for home prices to come down.”

Some aspiring buyers may be told to wait until home prices settle some before they jump in. But they can’t forget that rents are likely also high.

“Paying high rent now and hoping that you’ll find a better deal two or three years down the road [won’t work],” Frey says. “The better advice is to make a smart buy today for a property that will appreciate over the longer term.”

“Make a lower offer so you have room to negotiate.”

Some buyers may be told by their peers to make an offer that’s less than what they’re actually willing to pay for a home. Then they’ll have room to negotiate.

“The housing market in 2019 will be slightly different from what we experienced in 2018 when it comes to pricing and negotiations,” Howard Margolis, an associate real estate broker with Douglas Elliman in New York, told realtor.com®. “In regards to negotiations, what was once the premise of offering 10 percent to 15 percent below asking is not necessarily the case anymore, and it’s a strategy I would not recommend. In today’s market, a truly motivated seller is less inclined to engage in the back-and-forth of a real estate transaction, and listings are priced closer to the final sales price.”

Instead, home buyers are urged to base their offer on sales of similar sales in the area.

November 2018 Housing Affordability Index

At the national level, housing affordability is down from last month and down from a year ago. Mortgage rates rose to 4.99 percent this November, up 19.1 percent compared to 4.19 percent a year ago.

  • Housing affordability declined from a year ago in November moving the index down 10.6 percent from 161.0 to 144.0. The median sales price for a single family home sold in November in the US was $260,500 up 5.0 percent from a year ago.
  • Nationally, mortgage rates were up 80 basis point from one year ago (one percentage point equals 100 basis points).
  • The payment as a percentage of income was up from last month at 17.4 percent this November and up from 15.5 percent from a year ago. Regionally, the West has the highest payment at 23.8 percent of income. The Northeast had the second highest payment at 17.1 percent followed by the South at 16.8 percent. The Midwest had the lowest payment as a percentage of income at 13.7 percent.

Read the full article…

5 Millennial Real Estate Trends in 2019

More millennials are pursuing homeownership now than ever before. The national homeownership rate rose to 64.4 percent in the third quarter this year—an increase of half a percentage point over a year ago, according to the U.S. Census Bureau. That’s largely attributed to the rise in new, first-time home buyers.

As 2018 comes to a close, Dana Bull, an agent with Sagan Harborside Sotheby’s International Realty who has significant experience working with millennial clients, shares five trends to expect from this generation of buyers in the coming year.

1. Rising Interest Rates Will Prompt Buyers to Change Strategy
Just last week, mortgage rates rose to a seven-year high, with 30-year fixed-rate mortgages averaging 4.94 percent. It’s more than likely that rates will climb over 5 percent in the new year. This will cause many buyers to pause and reevaluate their purchasing power and strategy, Bull says. “Even a quarter point has a real impact on housing affordability,” she says. This means you’ll need to take more time to help clients analyze deals and understand what their money can buy in this shifting market.

2. Increased Competition From Baby Boomers for Properties
As millennials age and grow in their careers, they are acquiring more purchase power. According to the 2018 National Association of REALTORS® Home Buyer and Seller Generational Trends Report, 30 percent of millennials purchased homes for $300,000 and higher in the past year, up from 14 percent in 2013. That means millennials and boomers are going head-to-head for the same homes today. That trend is only going to continue to grow in 2019, Bull predicts. Both groups also seek similar amenities, including walkable neighborhoods and smaller home sizes with more upgrades, she points out. “Buyers in different generations—with wildly different points of view—are competing for the same homes,” she says. “For sellers and agents, catering to two different generations in marketing homes will also be a challenge.”

3. Willing to Put In Sweat Equity
Millennials are becoming more savvy to renovations and repairs, and they may have HGTV to thank for that, Bull says. “Millennial buyers are still far more aware of the work, costs, and implications of a renovation than their parents would have been,” she says. “Popular TV shows mean a more educated millennial buyer who knows what to look for in terms of red flags. But also has more confidence around renovating a home to make it their own and the ability to see past outdated wallpaper or a wall that can be easily removed.” Keep this in mind as interest rates continue to rise in 2019 (re: trend number one) and you’re helping clients who want to get creative while staying in their price range.

4. Clients Who are Well-Researched and Prepared 
Millennial buyers are doing their online research and are entering the market well-prepared. Show your value as a REALTOR® in other ways, Bull recommends. “They are relying on real estate professionals not to introduce them to homes, most of which they can find online, but to show them what can’t be researched: neighborhoods that are up and coming, which properties stand to gain value in the coming years, and guidance when it comes to negotiations and inspections.”

5. Social Media’s Continued Impact
Social media will continue to influence millennials’ homebuying habits, Bull says. This generation relies heavily on online reviews and social media presence to make purchasing decisions. A strong online reputation for real estate professionals is a must in catering to this market, she adds. Showcasing homes on social media—particularly Instagram—is essential for appealing to millennial clients.

Source: REALTOR® Magazine

Buyers May Find Relief in Cooling Housing Market

The housing market is showing several signs of slowing, providing a much-needed break for potential buyers who have been waiting to jump into the market. Existing-home sales were 2.4 percent lower in the third quarter than a year ago, and the drop comes at a time when many areas are starting to see an uptick in new listings.

Home prices in many markets are no longer rising by double digits—or even single digits—annually. But with a strong economy and low unemployment, the housing dip is more of a rebalancing of the market than a sign of a downturn, housing analysts say.

Sellers are realizing there is a slowdown and are starting to cut their prices to better compete. Nearly 29 percent of listings in major markets during the month ending Oct. 14 saw price reductions, according to the real estate brokerage Redfin. “The cycle has moved from seller-advantage to at least mildly buyer-advantage in many parts of the United States,” writes Kenneth Harney, a nationally syndicated real estate columnist. “If you’re a buyer, take your time. But keep in mind: If you shop diligently, this fall could be a smart time to catch a deal—a marked-down price on the house you really want.”

Source: REALTOR® Magazine

Americans Shift Their Perceptions of the Housing Market

For the past five quarters, the majority of Americans said their housing markets were overheating. Now, in the fourth quarter, 75 percent of Americans say their local housing market is starting to cool, according to ValueInsured’s Q4 2018 Modern Homebuyer Survey. Homeowners in California, Colorado, Texas, and Washington are most likely to say their local market is starting to cool off.

The survey “revealed some concerning evidence about the changing psychology of the housing market,” says Robert Shiller, a housing economist. “We will be watching these numbers as they unfold over the future.”

Seventy-two percent of Americans and 78 percent of “urban residents” say home prices are still too high. Urban homeowners blame “flippers and speculative investors” and “wealthy transplants from more expensive housing markets” for inflating their local home prices to unsustainable levels, according to the report.

Some home buyers may hit the pause button to see what happens in the housing market. Fifty-nine percent of interested home buyers (which includes first-time and move-up buyers) say they plan to wait for a “meaningful correction” before they buy. Fourteen percent say they plan to not buy at all until a correction occurs.

Several markets are seeing home prices slow. ValueInsured’s report notes that the fastest drops in home prices have been happening in Seattle, and North Texas has seen some of its largest sales declines in seven years.

“Buyers have switched from ‘hoop jumpers’ to bargain-hunter mode,” says Joe Melendez, CEO and founder of ValueInsured.

Source: REALTOR® Magazine

Why Home Buyers Need to Hurry

While there have been signs recently that the market may be shifting toward the favor of home buyers, prices are still on the rise in many areas around the country. The median sales price in July was $230,411, up 5.8 percent year over year.

But if buyers are hoping to wait it out, remember that mortgage rates are also increasing. The typical mortgage payment jumped 13.1 percent over that same one-year period, due to a nearly 0.6 percentage point increase in mortgage rates, according to new data from CoreLogic, a real estate research firm.

Mortgage rates are expected to keep rising, too. CoreLogic researchers predict a nearly 10 percent increase in buyers’ mortgage payments by next July, twice the rate expected for home prices. Rates are expected to increase by about 0.43 percentage points between July 2018 and July 2019. Housing forecasters predict median home sale prices to continue to rise by 1.8 percent in real terms over that same period.

Based on these projections, CoreLogic researchers predict the inflation-adjusted typical monthly mortgage payment to rise from $937 in July 2018 to $1,003 by July 2019. Furthermore, real disposable income is expected to increase by only around 2.5 percent over the next year. That means “home buyers would see a larger chunk of their incomes devoted to mortgage payments,” CoreLogic researchers note.

To calculate the typical mortgage payment, CoreLogic researchers use Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20 percent down payment (not factoring in taxes or insurance). The typical mortgage payment standard is used to help judge affordability since it shows the monthly amount a borrower would have to qualify for to get a mortgage to purchase a median-priced U.S. home.

Nevertheless, while mortgage payments are on the rise, they’re still low by historical standards, CoreLogic researchers note. In July 2018, the typical inflation-adjusted mortgage payment still remained 26.8 percent below the all-time peak of $1,280 in July 2006. The average mortgage rate in June 2006 was 6.7 percent compared to 4.5 percent in July 2018.

Source: REALTOR® Magazine