It’s Sunday and you head to the home you saw on the internet, because there is an open house and you believe this “may be the one”! You pull onto the street and all you can see for miles is cars, as if someone is having a pool party. As you continue to drive down the road, you realize these cars are all for your “dream home” viewing.
You walk in to take a look and you realize that this is THE ONE! The next thought you have is “ how will I ever be able to outsmart these other buyers who want my DREAM HOME?”.
Many buyers in this market find themselves in the same position as dozens of potential buyers put in bids, sparking a fierce bidding war and driving up the sales price. This scenario replays itself over and over again in real estate markets across the country. In the U.S., it’s a seller’s market, but housing has become historically unaffordable. Yikes!!!!
In our market in Farmington and Farmington Hills, we have seen the sale price of a home change any month between 12 and 15 percent.* (Realcomp MLS)
Why do home sale prices fluctuate?
A potential factor may occur when not enough people want to sell, especially the owners of new, starter homes. Also, builders may struggle with less-skilled labor — which means the demand for building affordable, starter homes would increase if the cost of land was affordable.
Adding to the affordability issue are massive student loan debt, which has limited many buyers’ purchasing power, and soaring health care costs. Remember: Even a 1 percent difference in the interest rate can have a big impact on a 30-year fixed mortgage, bumping up a homeowner’s monthly payment by upwards of 10 percent – and that’s a sizable amount.
Effects of the plunge in affordable housing have been widespread, leaving sales volume static. Many first-time home buyers remain priced out of the market and stuck in rentals, which are also getting pricier. Of those who have bought, many have been forced to buy homes farther from their place of employment, smaller in size, or in need of more repairs.
Will this fix itself?
It may in a period of time – or we can take steps to help the process along. It is critical to understand the definition of affordable housing, which includes homes for everyone. It means that a teacher, firefighter, or police officer can afford to buy a home in the city or town where they work. Purchasing a home allows someone to become more invested within their community. They have more interest in it, in improving their property, investing their time, and sending their children to the neighborhood school.
As consumers, we can spread the word about programs to help people gain trust and confidence by helping them with 25 percent concession on the selling or buying commission. Homes for Our Heroes is a national program that I brought into Farmington and Farmington Hills for veterans, police, fire, ambulance, anyone who works at a hospital, teachers, school administrators, and anyone who works for the government. This is a great way to afford more of a home, or receive more money from the sale of a home.
Let me give you an estimate equation:
You’re a firefighter who would like to have a larger home. Selling your home valued at $150,000 would normally cost you $9,000 in commissions. Using this program, you would only pay $7,875 and that would put $1,125 towards your new home. THEN, you buy a $225,000 home and would receive after closing a check for $1,687.50. So the concession totals $2,812.50 that you would not normally have received (amount of concession varies based on sale price).
Sharing these types of programs that you may hear about through newspapers and social media will help to motivate those who are sitting on the fence to sell, with the ability to make their dreams come true!
Some states have tried to offer a bit of relief to the unaffordability issue, setting up a home buyer initiative that allows residents to contribute funds to a tax-free account they can utilize to fund their first home. The Michigan State Housing Development Authority – MSHDA for short – partners with local lenders to offer home assistance programs in the amount of $7,500.
If you know of anyone who might be helped, please share this information. Always feel free to contact me directly or through “Ask Annette“ here at Farmington Voice.
Until next week, remember – I CARE about you and your home!