Real Estate Watch: Ready to Sell?

According to the National Association of Realtors (NAR), the average home seller realizes a 23% gain in equity from the time they buy their home. Understandably, those who purchased during the economic down turn and other volatile times would not realize as much of a gain as those who did not.

Those who bought their homes between 2005 and 2007 have realized approximately 1% in equity since that time. These homeowners would least likely to sell unless there is a need to do so.  This is contributing to the inventory shortage in many real estate markets around the country.

NAR provides the following approximations of equity positions of homeowners given when they purchased their homes:

Own a year or less would realize a 14% gain in equity

Own between 2 and 3 years would realize a 15% gain in equity

Own between 4 and 5 years would realize a 19% gain in equity

Own between 6 and 7 years would realize a 14% gain in equity

Own between 8 and 10 years would realize a 1% gain in equity

Own between 11 and 15 years would realize a 23% gain in equity

Own between 16 and 20% would realize a 63% gain in equity

Own 21 years or more would realize a 145% gain in equity

Overall, an average homeowner would realize a 23 gain in equity

This further explains why baby boomers in our area and across the country continue to bolster the real estate market. Typically, they are the homeowners that have been in their home for the periods of time with the most gains in equity. They are in a position to sell realizing significant gains in equity and down size their homes.

Some baby boomers are downsizing to two homes — one to live in for the first half of the year and the other to live in for the second half of the year. CoreLogic has identified some areas of the country thought to be “overvalued”. The primary reason for this overvaluation is the limited supply of homes. Developers are concerned with profit margins, and restrictive financing by banks which is also limiting the supply of homes.

Corelogic defines an overvalued market as “home prices which are 10% or more above the long-term sustainable level”. Keep in mind, home prices across the country have risen 11.5%. (Source: RealtyTrac)

The following markets were identified as been overvalued: Austin, Texas; Houston, Tx; Charleston, SC; Miami, FL; Washington, DC; Knoxville, TN; Philadelphia, PA; Dallas, TX; and Nashville, TN.

There are still opportunities in these markets, but it will take time and effort to find them. Downsizers with cash are seeking more mild climates and lessor taxes. However, they may need to also consider the other costs (i.e. property taxes) in some of these areas.

Mary Ann Clark is a realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed [email protected]

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