A recent study by real estate tracker Trulia, finds that it’s getting harder for homeowners to trade up. The causes: tightening inventory and resulting increases in prices.
Even if you’re ready and able to move up into a higher priced home, the study says it’s getting harder to find such a home, resulting in a kind of gridlock in the housing market…as well as higher prices and more aggressive competition for the home you select in the higher tiers.
How does Trulia define home tiers? At the lower end the median national price is $154,156; mid-tier homes have a median price of $267,845; premium homes in the top third have a median price of $542,805. Of course, these are national figures: across metro areas, median prices for each tier can vary widely. But the trend remains the same.
Across the U.S. Trulia finds that the inventory of starter homes (in the bottom tier) has decreased over the last four years, by 43.6%. Inventory of trade up homes have decreased 41%, while premium homes have decreased at 33.4%.
At the same time the price gap between a median trade-up home and a premium home is getting wider. In 2012 that gap (in Organge County, CA) was $421,938. By 2016 that gap had jumped to $664,000 — a 57% increase! And the inventory of trade up homes fell by nearly 70% over the last four years.
This translates into the fact that competition for the mid tier and top tier homebuyers has become more aggressive. So the era of multiple offers for the same home has arrived and may continue for some time to come.
At the same time, mortgage interest rates are still at historic lows so there is no better time to make the move to a higher-end home, if you act aggressively and possibly can target more than one home that would satisfy your upgrade needs.