Low mortgage rates and price growth for small homes make it the perfect time for move-up buyers to sell
Smaller homes have seen significant price growth over larger ones, and that means some homeowners may be sitting on a lot of equity – more than they may realize. With mortgage rates still low by historical standards but expected to edge up soon, homeowners with equity in their current home may find this is the perfect time to trade up into a larger one.
According to Fortune Magazine, many growing families are in a housing sweet spot right now that will likely continue into the first part of 2017. Between 2011 and 2016, the average price on a two-bedroom house rose 59 percent nationwide, but four-bedroom homes only rose 41 percent, according to ATTOM Data Solutions.
In many markets, move-up buyers will also find more choices in the higher price ranges. Housing supplies have increased nearly 8 percent in the $500,000 to $750,000 range.
Due to the increased equity in their smaller home, many sellers should be in a good position to walk away with more money from their home sale to use for their next downpayment. And move-up sellers may be more motivated to choose a higher offer over a speedier close, says Lawrence Yun, the chief economist for the National Association of Realtors®.
However, small home sellers who want to move up should get their financing in order quickly. The record-low mortgage rates in 2016 aren’t expected to last much longer. Average rates are predicted to rise as much as half a percent in 2017, says Dan Smith, president of PrivatePlus Mortgage.
While rates should still remain historically low, any increase makes a mortgage less affordable. If rates jump from 3.7 percent to 4.2 percent on a 30-year fixed-rate mortgage, for example, it would mean an $864 rise in annual payments on a $250,000 mortgage.
Sources: “The One Big Real Estate Trend You Need to Understand in 2017,” Fortune; “It’s a good time for move-up buyers to sell,” Florida Realtors