Sales prices jumped 7 percent annually in November, according to a new report from CoreLogic. That is the third straight month at that pace, far higher than the price gains in the first half of 2017. Low supply and high demand are fueling the spurt and neither of those is expected to ease up anytime soon.
With affordability constraints reigning in at the top of 2018’s industry watchlist, some buyers, especially first-timers, are being left out in the cold this winter. CNBC news just out at the jump of the new year cuts to the chase with, “Supply is actually falling even more now, and a strengthening economy is pushing demand. This will have potential buyers out early this year, trying to get a jump on the spring market.” And, first-time homebuyers, especially those desiring more square footage to bring up new families, are certainly at more risk of being swallowed up by affordability concerns. A report recently released by the Wall Street Journal touches on this with, “More square footage typically means more money – and that means higher mortgage payments, taxes, utilities and maintenance. Young couples buying a starter home are often coached to get something bigger than they need to anticipate a growing family.” These temptations to go big can often lead to impractical demands on the household in terms of sustainable financial security, so although some aren’t quite buying the downsizing trend, the key to long-term housing happiness this year unlocks a somewhat smaller door.
In the 2018 air of affordability, buyers will have to get creative in order to make best use of what they can realistically sustain. According to CNBC, “Without a significant jump in home construction, prices will remain high and likely move higher,” so buyers that can’t resist the allure of more space will certainly have their work cut out for them. The cost of this appeal can far outweigh the value of the home as the Wall Street Journal warns eager new buyers that, “Purchasing a house that’s too big can also get in the way of your retirement. Once your children leave home, you could end up living in – and paying for – a McMansion that’s largely empty.” Experts like Ray Rodriguez, regional mortgage sales manager for TD Bank, tells buyers, “Allow yourself some extra room – a spare bedroom and bath for guests or for a parent who might move in if necessary in the future – but don’t pay for extra rooms that you will never use. You want enough space to live comfortably, but you don’t want to heat, clean and pay taxes on space you aren’t utilizing.” Further, the Wall Street Journal suggests assessing three key ideas prior to upsizing including a concession of size to lifestyle needs, buying small with intention to remodel, and carefully weighing long-term returns. Out of the gate into 2018, it’s looking like the smaller the better.