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Opportunity Is Knocking For Senior Sellers And Younger Buyers Despite Market Uncertainty
By Kevin Joyce
According to the Wall Street Journal, American homeowners are sitting on $35 trillion (that’s right, trillion) in equity. That is both good and bad. For some, especially those in high-priced metropolitan areas, it is a get-out-of-New York card. With prices at an all-time high, homeowners, especially older New Yorkers looking to retire, can cash out their equity and relocate to warmer (and less expensive climes) and either rent or buy a new home, properly sized and priced for much less than the New York home they leave behind.
For home buyers who have sat on the sidelines waiting for available inventory to materialize, the time is right, right now. Many retirees and aspiring retirees put their homes on the market in the fall/winter, hoping to leave the snow and ice (and high taxes) in the rearview mirror.
With two recent dips in the interest rates by the Federal Reserve, mortgage rates have receded slightly, and this may well be the time to jump into the housing market.
Some experts fear that some of the new administration’s policies may spur additional inflation, making further cuts in interest rates less likely. If inflation returns, interest rates and home prices will likely increase.
And, as discussed in my last article, interest rate fluctuations foster uncertainty: Should you wait for rates to fall, or start shopping now? Timing the market is impractical, perhaps impossible, and unnecessary.
If you buy a home and mortgage rates fall, buyers can refinance their mortgages and take advantage of lower rates. If rates go up, you benefit from a secure, affordable mortgage.
But, if you delay a purchase and rates go up, it only becomes harder to afford a home. And, inflation favors the homeowner with a mortgage, making a fixed mortgage payment more affordable over time.
Plus, the time is right to start building equity. Anyway you look at it, homeownership builds wealth. According to CoreLogic, the average homeowner today has about $315,000 in equity, compared with an average of only $186,000 at the start of the pandemic.
Older homeowners are the most active in the market right now with the typical age of sellers at 63. This works locally because home prices down south are starting to fall, especially in Texas, Florida and other southern markets that have been overbuilt.
Let’s face it – today’s 30-year fixed mortgage rates around 6.75% are the new normal. If rates go down, buyers can refinance. Staying out of the market isn’t really an option anymore. Rents have grown as fast or faster than home values, and a shortage of rental options, especially for younger buyers, is certain to keep rents high. Much of the new apartment inventory coming on the market is being built for seniors.
Here’s the takeaway. If you are planning on retiring soon and moving to a more affordable state, the time has never been better to list your house and sell. If you are in the market to buy, mortgage rates are unlikely to retreat dramatically. The time to start building equity in a home is now, knowing the option to refinance is always out there, and knowing that home prices are only likely to continue to rise.
