Now is the time for trade-up buying. Although the recession and housing downturn left many Americans with underwater mortgages, the housing market has come a long way, and homeowners are finally seeing their equity increase – some to the point that they can trade up for a more expensive home.
According to a report from FNC, a real estate data firm, home price gains have enabled many Americans to move up when purchasing a new property. “An important sign of a healthy and sustainable recovery is increased housing turnover driven by trade-up buying, which is more or less discretionary spending,” said FNC director of research Yanling Mayer. “These buyers are typically more responsive to market conditions and financial incentives.”
Mortgage rates generally are on the rise (although rates dipped slightly during December 2013), so buyers are recognizing that the historically low rates of today might not be around tomorrow. Move-up buyers with sufficient equity are finding that now is the time to make a purchase. Eric Tan, a Redfin real estate agent in Los Angeles, said that these move-up buyers know that if they don’t act now, they may be kicking themselves in the months ahead.
How many buyers are trading up? Here’s what Daren Blomquist, vice-president of RealtyTrac, said:
- 40% of all homeowners, representing nearly 18.5 million with a mortgage, have at least 20% equity on their homes, putting them in a good position to sell.
- 8.3 million are on the equity fence, and will likely have at least 20% in the next 15 months.
- If only 5% of these 8.3 million homeowners put their homes on the market, that adds 415,000 homes for sale in the coming months.
“The increase in the share of equity sales reflects a market that is fully transitioning from investor purchases of distressed homes to primary home purchases by households,” said California Association of Realtors vice-president and chief economist Leslie Appleton-Young. “The market continues to improve as more previously underwater homes gain equity due to recent upward movements in price.”
Sam Rosenblatt is an award-winning Mortgage Planner at Academy Mortgage Corporation. For more information, please call 410-375-4447.
