A surplus in the market of high-end homes may mean big deals for homebuyers.
The U.S. has seen a growth in inventory of high-priced homes. Homes for sale between $500,000-$750,000 rose 15.9% in March compared to the same time last year, according to the National Association of Realtors®. Homes over $1 million rose 12.6% year over year. But many of these high-priced homes are lingering on the market for months and not fetching the desired purchase price.
The real estate market in the U.S. is strengthening, for sure, but consumers are much more wary post-recession. Stock market volatility is likely to add to homebuyers concerns, and economic conditions overseas means fewer foreign buyers than in previous years.
Today’s California homebuyer is more likely to choose affordability rather than luxury. The move toward minimalism and downsizing are furthering this trend. Homes priced between $300,000-$450,000 sell quickly, but listings priced at $600,000-$800,000 often stall depending on location. Homes sales get even more challenging above the $1 million mark.
When a home for sale has been lingering on the market, the seller will often lower the price or consider a lower offer. Some buyers are benefitting from huge discounts on high-priced homes that were not selling otherwise.
If you are considering a high price tag for your home purchase, there are a couple things to keep in mind:
Low Interest Rates
Mortgage interest rates on jumbo mortgages are still near record lows. Rates are remaining around 3.72% for the 30-year fixed rate, and 2.87% for a five-year adjustable-rate mortgage.
Be sure to shop around for your mortgage! Not all lenders offer the same programs; review as many as you can to find one that fits your situation.
More Cash Upfront
Lenders require higher down payments and more cash reserves as borrowers reach higher loan amounts, or “tiers.” For example, Wells Fargo will lend up to 89.9% on amounts up to $1 million, 80% on amounts between $1 million to $2 million, 75% on loans between $2 million and 2.5 million, and so on.
Higher Maintenance Costs
Homebuyers who are trading up should make sure they can also afford higher property taxes, homeowners’ insurance, and home maintenance costs. If the home is exceptionally large, furnishing and decorating a large space can also be quite expensive.