This 2018 holds a lot of promise for homeowners. With home prices continuously rising across the nation, this is definitely a great time to put a property on the market.
According to Attom Data Solutions, most home sellers have earned a profit of about $54,000 on average at the end of December last year, a figure that is actually the highest in the past 10 years. Therefore, sellers are receiving an average return on investment of approximately 30 percent.
This should be reason enough for homeowners to sell their property. However, most of them feel that searching for a new home to move into is more challenging.
Because of the high demand for new homes, the housing stock in most major cities has decreased dramatically. Therefore, house hunting might prove to be difficult in the metro. Furthermore, the shortage of available homes has caused the prices to skyrocket.
As a result, massive bidding wars erupt and several homes are sold way above their asking prices. Although a huge appreciation might appear favorable to the sellers, this appears bad news for the buyers, particularly the low-income earners.
Although it is actually fun and exciting to see a huge increase in value for your home, said Allie Howard, a real estate agent based in Seattle, getting stuck in a rental situation might seem a bit scary for sellers because of the threat of being priced out while other homes appreciate.
Where the most home appreciation happens
Home sellers from the West Coast have witnessed the largest gains along with those from San Jose, California. At the end of the year 2017, many have experienced a 91 percent return on investment. Meanwhile, the sellers from San Francisco saw an ROI of 73 percent towards the end of last year.
In Seattle, the real estate market is booming with profitable sales. A certain woman, named Nicole Rendahl, have priced and sold her four-bedroom house at $400,000 more than the initial investment she made in 2008. She acquired the property at just around $1,199,000. Yet she was able to close the deal in just seven weeks for the total amount of $1.6 million last November 2017.
She recalled how the property went through multiple reductions in price before purchasing it about 10 years ago. She claimed that her family has been thankful for the price reduction because they couldn’t afford the home when it was listed at first. Currently, Nicole Rendahl and her family are looking for an upgrade, but they haven’t found the house that fits their preferences yet.
Rendahl has recently lost in a bidding war, but she remains hopeful that more for-sale inventory will hit the real estate market soon. Her target is to find and move into a new home by the end of this year’s summer.
Apparently, most homeowners stay in their homes for a little over than eight years on average. In fact, four years are the average tenancy between 2000 and 2008.
Outlook of new home constructions this 2018
The rate of home construction does not keep up with the rising demands for new homes. Only one million new homes are built and put on the market. This is way below the historic norm of about 1.5 million new residential units.
Since there are more people who do not have a new home to move into, there will be more who will stay put. This creates a ripple effect that greatly affects the housing market all throughout.
As stated by Daren Blomquist, Attom’s senior vice-president, “The longer home ownership tenure is a central piece to why the housing market is behaving as it is where home prices are rising fast and there is an inventory logjam.”
In the past, home buyers occupying starter homes usually trade up for a bigger house after a few years – mainly after having children and starting a family. However, if they cannot find a new home to move into, they tend to stay in the starter home even longer. Because of the shortage of buyers, trading up becomes particularly difficult for first-time buyers who wanted to break into the market.
Impact of homeowners staying put
Blomquist theorized that since homeowners are not moving up, home builders are not seeing the need for more homes. In addition, buyers might also experience higher borrowing costs this 2018. This is due to the fact that interest rates have risen.
For a 30-year fixed mortgage, the average rate has been below 4.5 percent since the month of January 2014. Consequently, higher mortgage rates will keep homeowners from moving up if the rates at the time of purchase are low; therefore, impacting the affordability equation.