Do you remember the soundtrack to the old 1970s television show, The Jeffersons? The catchy jingle talked about “moving on up,” in the context of living in a “deluxe” property (in the sk-ky) on a nicer side of town.
While we thoroughly enjoyed the humor and slice-of-life that the Jeffersons offered us, they were really on to something when it came to smart real estate principles that characterize the motivations of today’s move-up buyer.
In fact, move-up buying – which is a process of selling your existing home so you can purchase a home that is bigger, nicer, in a nicer area, or just fits your lifestyle better – is a fundamental aspect of successful home ownership.
For the most part, people aren’t able to purchase their “dream home,” or even the home they’ll live and retire in long term, when they buy their first or even second home. But the beautiful thing about real estate is that it affords owners unique opportunities to gain equity, build wealth, and then sell with profound tax advantages, leveraging the wealthy they built through housing as a firm stepping stone into a bigger/better/nicer home.
Today, we’ll outline some data, statistics and bullet points about move-up buyers and buying. In part 2 of this blog, we’ll offer more reasons why it’s the perfect time to sell your existing home and buy a nicer one, and in part 3 we’ll offer our 15 tips for move-up buyers to get it right – just like the Jeffersons!
The good news is that it may be the perfect time to do just that in the Greater Sacramento area, many parts of California and the U.S. in general. Why is it such a good time for move-up buyers?
Many homeowners in the California capital now have 50% or more equity than they did in 2012, which means our home prices are not only high enough to sell, but also cash in. During the housing bust and subsequent recession, many people wanted to sell their homes (or shed their bloated mortgages!) but couldn’t since they were underwater – owing more than the home was worth.
But those days are certainly gone, as Sacramento has been one of the country’s hottest metro markets for home price gains in the last five years. In fact, Sacramento homeowners have seen 13.1% home value appreciation over the last year, and 2016 is surpassing expectations so far, as we might reach double-digit equity gains again. For home sellers, that could mean that now is the best time to sell and maximize that profit.
First off, how can we define move-up buyers? The real estate statistics site DataQuick classifies them as “home shoppers [that are selling their existing home and are now] looking in the $300,000 to $800,000 price range.”
Let’s look at other data about the average move-up buyer, as well as compare them to first-time homebuyers:
· The average household income for move-up buyers is $84,170 (compared to $64,074 for first-time homebuyers).
· That’s 1.5 times higher than the household median income for the total population.
· The average age is 45 (compared to 33 years old for first-time homebuyers).
· The average move-up household contains 2.7 persons, which is about the same as the household demographics for first-time buyers.
· As of 2011, the average home seller has lived in their house for nine years.
· Move-up buyers typically opt to buy an existing home, as 73% purchase existing homes compared to only 27% that bought in a new home development.
· 17% of move-up buyers bought a house that cost $500,000 or more, while only 6% of first-time buyers could afford a house in that price range.
· As would be expected, move-up homebuyers have more money to invest in their new home purchase, ostensibly from equity they received after selling their first home.
· In fact, 60% of move-up buyers are able to put 20% or more down payment towards their new home purchase, and 22% of move-up buyers have no mortgage at all.
Why do people become move-up buyers? Of course, there may be financial benefits to moving up and owning a new house, but that’s usually not the reason people sell their existing home and move. In fact, many people just want a nicer, bigger home and realize that they can finally afford it – with the help of equity they’ve accrued in their past home.
But there are a host of other reasons why they might want to sell and “move up” including:
Their home is too small, with too few bedrooms/bathrooms
They feel they bought the wrong home when they purchased
A job transfer
Moving in with a partner/marriage
Divorce or breakup
Opt to live in a better neighborhood
Empty Nesters after kids go to college
They want to be closer to family
Their current commute is too long
Considerations due to health problems
A promotion or influx of cash!
A lifestyle change
All the neighbors are selling!
They’ve improved and remodeled their home as much as possible.
Or, like most move-up buyers, they may just be looking to take advantage of the perfect window to cash in on their equity and unpack their boxes and belongings into their dream home.