I’ve lived off and on in Fort Collins since 1971. I’ve personally owned and sold a few homes, some in Old Town, some in Midtown, regretting that I didn’t keep them all. But now we have a situation where less and less people can afford to move here. If they work here, they will have to commute at least ten miles or more, contributing to pollution and traffic woes. We also have the issue of homeowners with large family homes in good neighborhoods, wanting to downsize but unable to because there are too many buyers for homes priced in the mid-range, especially ranch homes. And then there are the young families wanting to move up to a bigger home more suitable for their growing families. In a post I wrote more than a year ago, I proposed an event where everyone would put their house on the market in the same week and then we’d have some fun!
The reality is that interest rates will go up and hang out at about 6.5% according to national real estate company Windermere’s economic adviser, Mathew Gardner. Still not bad considering I paid 17% interest for my first home in 1978. Of course, I paid $30,000 for the house itself. For every 1% increase in rate, there’s a $10,000 price decrease in purchasing power. If a buyer qualified for $425,000 at 3.8%, they’ll only qualify for a purchase price under $400,000 when interest rates start to climb and level off.
That tells me that homeowners who are hoping to sell their homes at a premium with our present-day interest rates, should think about selling soon. In a year or so when interest rates increase, they’re won’t be as many buyers who qualify at the higher price range. It’s a strategy that would require the homeowner to sell high, move out and rent for a while before they find the perfect smaller home. But they would have the cash to beat out other potential buyers when they find their “last” home.
It’s a smart strategy that requires patience and an effort to get rid of all that stuff, which you’d eventually do anyway when you downsized. The bottom line is that it’s going to get harder and harder to find those lower-priced homes because with the rise in interest rates and prices, the majority of buyers will be in the $250,000 to $350,000 range for a long time.
Additional information at: http://www.huffingtonpost.com/2013/05/31/downsizing-your-home_n_3324986.html