You Can Reap The Rewards As A Seller Someday, Too
Yes, real estate prices keep rising. And that’s a steep climb for many home buyers nowadays. But the silver lining is that what goes up today can go up even higher in the future—at a time when the hurdle of home buying is far behind you.
New data show that it’s a rewarding time for sellers, and for good reason. They’ve paid their dues as homeowners. They’ve outlasted the Great Recession. Now, they’re cashing in at an ideal time when demand is high. This demonstrates a fundamental truth about real estate: owning a home often can be a great investment that pays dividends down the road.
By doing your homework, purchasing a worthy property in a good location now, and keeping your home maintained, years from now you’ll likely find yourself in an even better spot than sellers in 2017.
Enticing Price Gains
A fresh report by ATTOM Data Solutions revealed that homeowners who sold in the first quarter of 2017 enjoyed an average price gain of $44,000 since they first purchased. That translates to a 24 percent return, on average, on their original purchase price.
It also represents the highest quarterly home seller profits earned—in percent return and dollar amount—since the third quarter of 2007. Put another way, the first three months of this year were the most profitable period to be a home seller in almost 10 years.
These sellers certainly didn’t earn these profits overnight. But they also didn’t have to be homeowners for decades, either. In fact, homeowners who sold in the first quarter had owned for an average of just less than eight years.
This wasn’t a fluke that happened in only a few scattered markets, either. Overall, 54 percent (51 of 95) of the markets ATTOM Data Solutions analyzed reached new pre-recession peaks in median home prices in quarter number one.
What The Findings Mean To You
Daren Blomquist, senior vice president for ATTOM Data Solutions, says the nearly 10-year high in home seller profits reinforces what we already know: that sellers firmly have the upper hand in many markets across the country.
“That is somewhat bad news for buyers because it means they will continue to face stiff competition when purchasing a home,” he says. “But it’s good news, too. That’s because, once they successfully purchase a home, they will likely see that it’s a good investment.”
Blomquist says one of the report’s most important findings is the average ownership tenure of 7.97 years nationwide. This number helps explain why inventory remains low in the current housing recovery.
“Homeowners who bought in the wake of the last housing bust are staying in their homes almost twice as long as what we were seeing prior to the Great Recession. This shift has disrupted the typical move-up pattern. And that impacts inventory for first-time home buyers as well as demand for new homes,” he adds.
Blomquist believes that higher potential homeowner profits will lure more of them to sell. That will create more demand for new homes and loosen up inventory a bit for first-time purchasers in 2017.
Home Buying Today, Home Profiting Tomorrow
He also agrees that rising home prices now can reward buyers later on.
“Buyers in 2017 are purchasing in a market that is a bit frothy. However, the fundamentals of low supply and strong demand are still in place,” says Blomquist. “That should keep home values trending higher going forward—although likely at a slower pace than what we saw in previous years.”
Sure, there may be shocks to the economy or housing market that could cause temporary price downturns. “But a home over the long haul will continue to be a good investment,” he notes. “We’ve even seen that proved during the downturn of the last 10 years. Homeowners who bailed out during the bad times may be sorry they did, as homeowners who stuck it out are now seeing heady profits when they sell.”
The major takeaway? 2017 is a good time to buy a home and count on decent returns, especially for those who plan to stay put for at least seven to eight years.
“That’s because demand for housing continues to be strong, thanks to population growth, increasing household formation, and continued strong interest from foreign buyers in U.S. real estate,” Blomquist says.
Get A Leg Up On The Competition
By taking a few key steps, you can better position yourself to buy a home you can afford in 2017.
“First, get pre-qualified for a loan to better understand how much you can afford. This also shows sellers that you’re a serious buyer,” says Blomquist.
Second, use online and mobile resources to research areas and hunt for houses that match your criteria.
Third, employ low-tech methods that other buyers may overlook or be too shy or lazy to pursue. “Visit lots of open houses, walk through communities, even knock on doors of people who are not selling to ask about the neighborhood,” he says. “Start forming relationships with people who live in and agents who work in a neighborhood you desire. These relationships will give you an advantage over those just relying on technology to house hunt.”
Lastly, if you find a particular home you want to make an offer on, follow this old school rule: “Write an old-fashioned letter to the owners telling a little of your story and why you love the home and neighborhood,” suggests Blomquist. “Make sure it’s handwritten, and consider personally dropping it off.”