Even while home prices are on the rise—fueled by the low supply, low mortgage rates and investor buying—the number of Americans that own homes, as a percentage of the population, is decreasing. The reasons vary, since many current renters are former homeowners that lost their homes during the financial crisis and others simply do not have enough income to qualify. But some potential homeowners, with savings for down payments and the desire to own may be priced out of the market by as little as $1000.
A new report by the National Association of Home Builders points out that an increase of just one thousand dollars in the price of a new home can upset the delicate balance of income-to-debt ratios required to qualify for mortgages. According to their report, that $1000 increase in a home’s price knocked over 200,000 potential buyers out of the market in 2013, assuming a 10 percent down payment and a 30-year mortgage.
Subtle cost increases
The NAHB report suggests that local regulatory increases—fees, permits, zoning costs and higher taxes for new construction—price new homes out of reach for otherwise qualified potential homeowners. Since it is in the best interest for most localities to have more homeowners than renters, this inadvertent price increase imposed by local regulations may ultimately produce an undesirable effect.
Since homes in established neighborhoods are less likely to have the higher regulatory fees and taxes that new construction has, a solution is to buy a resale home. Real estate professionals like us specialize in finding the right home for the right price for qualified buyers. Homes in older neighborhoods have other advantages as well. For instance, initial outlay for a new home does not often include the cost of landscaping. A resale home typically has at least some landscaping in place. When a new homeowner is on the very edge of what they can afford, extras like that raised flowerbed you have your heart set on, the stone pathway you envision or an in-ground sprinkler system and newly laid sod often have to wait.
We can help!
With income not keeping pace with the cost of new housing, you may find yourself priced out of the new-home market. We can help you find an affordable solution without sacrificing the amenities you want in your new-to-you home. Compared to new homes, pre-owned homes have the advantage of negotiation between buyer and seller on some or all of a home’s features or components. Remember that any upgrades the previous owner put into the home—ceiling fans, upgraded faucets, hardware and appliances—typically come with the home.
New homes often have warranty issues. The first owner ends up dealing with all of those issues so that by the time the second (or later) owner moves in, the potential for problems is less. A home inspection before your purchase should reveal any potential problems that then can be included in final negotiations at the time of close.
For information on the best home purchase for you, give us a call.