How about the concept of “First Time” buyers……… skipping the starter home market altogether, and buying a larger “Forever” home, since it now takes longer to build equity in a home.
If you’re a first time buyer, no children, in your 20’s, have good income, it just makes sense to skip the 1200 – 1300 square foot home and go on up into the larger homes, with more to offer, and keep the home longer. With record low-interest rates, homes still at bargain prices, 40 year mortgages being available……..why not buy a “Forever” home and grow into it.
The traditional thinking has always been for young couples to buy a small starter home……build equity over a few years, and as the family grew, sell and use that equity as your down payment on a larger home. That “start -out-slow” approach is no longer the approach in this “new normal” market.
We are seeing savvy twenty-somethings scooping up sprawling homes at record pace. These young buyers are seizing some of the best bargains in housing deals in history! Most believe that we will never see low mortgage interest rates like these ever again!!
Clearly most young people don’t have the financial muscle to buy bigger, however those who do increase their buying budgets, often see more options, even though they have purchased a home that currently is to large for their current needs.
In the 1990’s the typical buyer sold within 4 years of purchase. In 2002, buyers averaged 7 years of ownership. Now that number has stretched to 15 years! This has largely due to negative equity in the homes, brought about by the recession that started here in 2006. Others simply put off selling, waiting for a better market, and have held onto their homes.
It has been common recently, to hear buyers state that they plan to stay in the home for at least a couple of decades. This is especially a trend for children who have thought ahead about their aging parents, and the high costs of nursing homes and assisted living facilities, versus buying that larger home with extra bedrooms or mother-in-law suites, for their aging parents.
A word of caution about going to your debt ceiling maximum, when you borrow for that larger home………………don’t skip the home inspection. It is critical that you take a hard look at 5 items during the home inspection…….roof…heating/cooling systems…electrical…plumbing…structural condition. No one has a crystal ball on how long things will last, but big-ticket repairs can sink your “Dream” home into a money pit. Dont skip this valuable report…….buy a home that is going to be maintenance free for several years of ownership.
Another word of caution, don’t be in a rush to decorate or furnish these additional empty spaces and rooms. Trends in lifestyle’s often change over time, and costs to furnish completely at purchase can be expensive…..only to change everything out just a few years later, as your tastes change. Leave room to grow!.