You’re beginning to feel a little cramped in that home that seemed so perfect several years ago. There just aren’t enough bedrooms anymore, or adequate storage space or a big enough back yard for the kids and the dog to play. Or maybe there is another little one on the way – a baby, not a dog!
Many Bay Area residents are facing a similar dilemma these days. While that small bungalow or rancher made perfect sense back when you bought it, you are quickly realizing that you have outgrown your home. The good news is that this may actually be a good time to move up to a larger home or one in a neighborhood you’ve been eyeing.
Up until recently, many homeowners who bought just before the peak of the housing market had little opportunity to move up to a larger home. Many of them were “underwater” on their mortgage, meaning they owed more on their loan than the home was worth. But that has changed in the past couple of years.
The number of homeowners who are seriously underwater on their mortgage, meaning their debt exceeds their home value by 25% or more, has fallen since the recession, according to housing data firm RealtyTrac. The number dropped to just 17% nationwide in the first quarter of 2014, down from 26% a year ago. That statistic indicates that more homeowners may be able to pull equity out of their properties to move up to another home.
With home prices in the Bay Area steadily rising, there’s a good chance your home is worth more than you think. According to DataQuick, the real estate information firm, the median sale price of new and existing homes in May jumped 18.9% from a year ago.
Getting into a larger home isn’t the only reason homeowners typically think about moving. Others consider “trading spaces” because of job relocations or a desire to get into a certain school district or simply because they’ve been pining after that dream home in a nicer neighborhood. Others may actually be thinking about downsizing as they enter retirement or leaving the area for a retirement destination elsewhere.
If you’ve been kicking around the idea of moving up, downsizing or simply trading spaces, there are several reasons why the current housing market may work in your favor right now:
- Entry-level homes are in greater demand. One of the hottest segments of the housing market has been low to mid-priced homes in many communities. Well-qualified first-time buyers and others are out there looking for a home while interest rates are still historically low and prices are relatively affordable. In some areas, there are multiple offers for the best properties.
- Inventory is still low. The number of homes on the market remains very low by historical standards. While there’s no shortage of buyers these days, there certainly is a shortage of good home listings for them to pick from in many areas. The law of supply and demand may work in your favor.
- Mortgage rates are still near historic lows. Low rates help make homes more affordable including yours and the home you want to move up to. With 30-year fixed rate mortgages still hovering in the low 4% range, buyers can stretch their housing dollars a lot further these days.