Yes, real estate prices keep rising. And thatâ€™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 futureâ€”at a time when the hurdle of home buying is far behind you.
New data show that itâ€™s a rewarding time for sellers, and for good reason. Theyâ€™ve paid their dues as homeowners. Theyâ€™ve outlasted the Great Recession. Now, theyâ€™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 youâ€™ll likely find yourself in an even better spot than sellers in 2017.Click to see today's rates (May 26th, 2017)
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 earnedâ€”in percent return and dollar amountâ€”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 didnâ€™t earn these profits overnight. But they also didnâ€™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 wasnâ€™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.Click to see today's rates (May 26th, 2017)
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.
â€śThat is somewhat bad news for buyers because it means they will continue to face stiff competition when purchasing a home,â€ť he says. â€śBut itâ€™s good news, too. Thatâ€™s because, once they successfully purchase a home, they will likely see that itâ€™s a good investment.â€ť
Blomquist says one of the reportâ€™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.
â€śHomeowners 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,â€ť 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.
He also agrees that rising home prices now can reward buyers later on.
â€śBuyers 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,â€ť says Blomquist. â€śThat should keep home values trending higher going forwardâ€”although likely at a slower pace than what we saw in previous years.â€ť
Sure, there may be shocks to the economy or housing market that could cause temporary price downturns. â€śBut a home over the long haul will continue to be a good investment,â€ť he notes. â€śWeâ€™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.â€ť
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.
â€śThatâ€™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,â€ť Blomquist says.
By taking a few key steps, you can better position yourself to buy a home you can afford in 2017.
â€śFirst, get pre-qualified for a loan to better understand how much you can afford. This also shows sellers that youâ€™re a serious buyer,â€ť 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. â€śVisit lots of open houses, walk through communities, even knock on doors of people who are not selling to ask about the neighborhood,â€ť he says. â€śStart 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.â€ť
Lastly, if you find a particular home you want to make an offer on, follow this old school rule: â€śWrite an old-fashioned letter to the owners telling a little of your story and why you love the home and neighborhood,â€ť suggests Blomquist. â€śMake sure itâ€™s handwritten, and consider personally dropping it off.â€ťClick to see today's rates (May 26th, 2017)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2017 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)