The Trade-Up Dilemma: The Effect of a Tight Home Inventory Market
There are essentially three types of home purchases: The Starter Home, the Trade-Up Home, and the Premium Home. The starter home might seem self-describing with one exception; when older home buyers look for a smaller home, this is the type of home they are considering. Starter home in this sense does not necessarily mean fixer-upper. The premium home seems easy to define. And yet, over the last several years, particularly in the west, more and more ‘average’ homes have fallen into this category by virtue of the price. And then there is the trade-up home, the home sandwiched in the middle, the family home, the middle class enclave.
Unfortunately, each category is currently impacted by a tight home inventory market. In a normal marketplace, the starter home is followed by the trade-up home and if life goes well, a premium home is the next step in the housing journey.
If there are three types of homes for sale, there is an unusual symbiosis in the overall market. Starter homes are purchased by both younger and older buyers largely for the same reason: affordability and size. But in the post Great Recession housing crisis, many of these homes were gobbled up by investors who turned them into rentals. Those that were put back on the market for sale had been flipped and may not have been worth the remodeled price. In fact, many “starter” homes were now priced as trade-up properties.
Trade-up homes are the in-between houses. These are the homes that are, as the sale pitch my go, “perfect for a growing family.” They tend to be closer to schools and activities, in more vibrant neighborhoods, and larger. These might be the homes an older seller raised a family in and desire that sort of continuity to occur with the next buyer. Despite an emotional motivation, trade-up homes are now often priced slightly out of range for a growing family.
Premium homes were often about luxurious details, fine appointments, oversized living spaces and the gated entrance. And while these homes are still being built, premium is now more a price point and is now on homes in the trade-up category.
The net effect of this is a higher price point for each category but fewer homes on the market. Why, if sellers can get any price they seem to attach to the house, would this be a problem? Almost every seller is a buyer. Sell a starter and look for a trade-up. Sell a trade-up and look for a premium home. Sell a trade-up or a premium home and look for a starter home.
The reality of a tighter market skews this progression. This makes the money you thought was a pure, in-your- pocket profit from the sale of one home less of a profit. That money is now needed to purchase the next size home, and in some instances, not a larger home.
The only upside: The premium price spread as this phenomenon is referred to has created the greatest increase in inventory of the three I just mentioned over the past year. That is not much in the way of consolation for the rest of the home buying public but if you are looking for a premium home, I know of one that is just right for you.
How can we assist you today?
On behalf of The Jones Group @ Sunriver Realty
Nola Horton-Jones, Principal Broker/Realtor | ABR, C-RIS, e-PRO, GREEN, RSPS, CCIM Candidate
Bryce Jones, Broker/Realtor | ABR, CRS, e-PRO, GREEN, GRI, RSPS, SFR
The Jones Group @ Sunriver Realty | 57057 Beaver Drive | Sunriver, OR 97707
Mobile: 541-420- 3725 | Mobile: 541-420- 4018 | Fax: 541-593- 5123
Licensed in Oregon