While last year’s rising home prices brought relief to many underwater homeowners, allowing many older homeowners with increased net worth to purchase new homes, they also precluded many young first-time buyers from purchasing, according to a report from Houston, Texas-based BBVA Group, a global financial services firm.
“Older homeowners are increasingly able to purchase a new residence with cash only after they sell their current home,” said Jason Frederick, an economist for BBVA Compass.
In December 2013, 42 percent of residential home sales were made in cash, a significant increase from just 18 percent a year earlier.
With many older Americans feeling confident as their net worth rises with their home values, homebuilders are now targeting potential buyers 55 years old or older, according to BBVA.
Younger Americans who do not yet own a home find themselves in a very different situation from seasoned homeowners. Home price growth has outpaced income growth, and according to Frederick, “[Y]oung families will need to see faster income growth and save additional money to make a larger down payment.”
Prices will continue to rise this year, but appreciation will slow from the 11.5 percent annual gain last year to a pace of 8.5 percent for 2014, according to BBVA’s projections.
Gross domestic product (GDP) and employment will also improve this year, according to BBVA. GDP will grow by 2.5 percent this year, and the economy will add 2.4 million jobs. These improvements will carry over to the residential market, translating to 2.1 million new households over the next two years.
“[H]ousehold formation will increase with economic growth because both immigration rises and young people move out of their parents’ houses,” BBVA said in its report.
However, many of these new households will enter the rental market rather than the purchase market. BBVA predicts rental households will grow by 1.2 million over the next two years, while owner-occupied households will grow by 900,000.
Home sales will rise in 2014, according to BBVA. Existing single-family home sales will rise 4.2 percent over the year to about 4.7 million, while new single-family home sales will jump up 13.4 percent over the year to about 490,000.
With inventory low, BBVA predicts a 17 percent increase in housing starts this year. Single-family housing starts will total about 810,000, and multifamily starts will total about 274,000 for an overall addition of about 1.1 million housing starts.
The healing market will also encounter fewer foreclosures this year than last. BBVA predicts between 700,000 and 800,000 foreclosures this year, down from 1 million last year.
no, no, no… FSBO”
Some homeowners consider trying to sell their home on their own, known in the industry as a For Sale by Owner (FSBO). We think there are several reasons this might not be a good idea for the vast majority of sellers.
Here are five of our reasons:
1. There Are Too Many People to Negotiate With
Here is a list of some of the peoplewith whom you must be prepared to negotiate if you decide to FSBO.
- The buyer who wants the best deal possible
- The buyer’s agent who solely represents the best interest of the buyer
- The buyer’s attorney (in some parts of the country)
- The home inspection companies which work for the buyer and will almost always find some problems with the house
- The appraiser if there is a question of value
- Your bank in the case of a short sale
2. Exposure to Prospective Purchasers
Recent studies have shown that 92% of buyers search online for a home. That is in comparison to only 28% looking at print newspaper ads. Most real estate agents have an internet strategy to promote the sale of your home. Do you?
3. Results Come from the Internet
Where do buyers find the home they actually purchased?
- 43% on the internet
- 9% from a yard sign
- 1% from newspapers
The days of selling your house by just putting up a sign and putting it in the paper are long gone. Having a strong internet strategy is crucial.
4. FSBOing has Become More and More Difficult
The paperwork involved in selling and buying a home has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons that the percentage of people FSBOing has dropped from 19% to 9% over the last 20+ years.
5. You Net More Money when Using an Agent
Many homeowners believe that they will save the real estate commission by selling on their own. Realize that the main reason buyers look at FSBOs is because they also believe they can save the real commission. The seller and buyer can’t both save the commission.
Studies have shown that the typical house sold by the homeowner sells for $184,000 while the typical house sold by an agent sells for $230,000. This doesn’t mean that an agent can get $46,000 more for your home as studies have shown that people are more likely to FSBO in markets with lower price points. However, it does show that selling on your own might not make sense. The KCM Crew in For Sellers