OfflineHome equities are improving. Many homeowners who have been waiting to sell are finding that their equity has risen to a point where they can do so and trade up to a larger home. It helps that prices have been rising significantly, though most of that pressure has been from cash investor buyers.
Another pressure point moving trade-up buyers to make a decision is rising interest rates. Many housing market analysts are predicting continued upward pressure on interest rates, especially with the Fed reducing stimulus activity. Foreclosures are still dropping, which is only adding fuel to the price fire. This combination of factors is helping home appreciation and freeing up more homeowners to sell and take out some equity. However, more important for the market, they can roll that equity into another home.
Trade-up buyers are a contributing factor to increased housing turnover, and they’re mostly considered to be discretionary spenders. They’re not moving for a job, instead their families are growing and the purchase of a new larger home is their goal. These buyers have been sitting on the sidelines, either unable to sell or waiting for enough equity to move up.
Recent reports show that the discount off market value paid by investors for foreclosures has been dropping. In 2008 and 2009, investors were paying on average 25% below market value for foreclosures. That discount was only 12.5% a year ago, and dropped to 8.1% in mid-2013. In areas with very low foreclosure inventories, California as an example, some investors are even paying a premium over market value.
Real estate investors, especially those who prefer fix-and-flip or wholesaling, may just find that they have a retail market niche in trade-up buyers. As these price trends continue, it could become more difficult to profit in the middle and flip to another investor searching for discounted value. Instead, targeting the move-up buyer, investors may be able to meet demand in a market with inventory shortages.
Another factor that could create a niche is that many of these trade-up buyers may still have a problem with getting a mortgage, especially with new and tighter rules. Lease-purchase sandwich deals could be a way to place these buyers into nice homes while they build their credit scores and down payments.
Trade-up Buyers Coming Back
Posted on: Mon, 01/13/2014 - 18:18
Trade-up Buyers Coming Back
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Chris and Kim Mathis here from Denver, CO. We just had our one on one as well with Andrea Weule. Awesome 2 days. We had her undivided attention. She was very patient listening to all our frustrations and was able to put everything into perspective for us. Looked at 3 houses with her a received excellent advice. Went to make an offer on one in a very HOT area but had gone under contract the night before. Our lesson.... don't hesitate. Looked at another today and will be making an offer. Our one on one has helped with our confidence. The program brings it all full circle. Thanks Dean for the One on One program. Andrea YOU ROCK!!
Thanks again... Chris and Kim
I agree with you especially here in San Diego & So Cal that is very true, tons of move up buyers. Will have to add them to my buyers list, thanks.
Tony
Go faster do more! GFDM!
Your article contain important information, which we should keep in mind during buying. Thanks for sharing this wonderful article with us.
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Where is the upward pressure going to come from to enable the move up buyers?
"Last November, NAR reported that tighter mortgage lending standards are keeping qualified buyers, particularly singles and first-timers, out of the home-buying market."
http://www.prosalesmagazine.com/economic-conditions/first-time-homebuyer...
"Boomerang Buyers" - "Changes in lending guidelines and population shifts make these buyers essential to the recovery of the housing market. According to CoreLogic’s latest report, 4.8 million foreclosures have been completed since September of 2008. This figure does not include short sales, bankruptcies, loan modifications, deeds in lieu of foreclosure and other mortgage-related disqualifying events. That number is estimated to be well over 10 million. Alienating this large and growing pool of potential buyers does not bode well for the market in an environment where natural housing advancement has been largely disrupted."
http://www.prweb.com/releases/2014/01/prweb11465665.htm
"The Great Recession continues to impact the ability, willingness, and plans of members of Gen X to form independent households. Members of Gen X—also referred to as echo boomers—are postponing independent living, marriage, and children. Birth rates hit all-time lows in 2012 (half the level of the baby boom), and marriage rates are the lowest they’ve been in a century."
http://www.builderonline.com/housing-trends/gen-x-prefers-to-rent_o.aspx
literally! Investors in my area are making cash offers way over asking price; no chance for first time home buyers, especially if the houses need to be rehabbed. Then investors fix them and put them back on the market for prices that not many can afford...
Valerie
“And will you succeed? Yes indeed, yes indeed! Ninety-eight and three-quarters percent guaranteed!” ― Dr. Seuss
"I believe in angels, the kind that heaven sends; I am surrounded by angels, but I call them friends" - Unknown
My journal: http://www.deangraziosi.com/real-estate-forums/investing-journals/59110/...