The Demographics of the Market

Market demographics are important. What sorts of people should mature buyers be paying attention to when they want to sell?

In previous entries, I’ve discussed creative ways that mature buyers, aged 62 or older, can purchase homes and get financing in order to compete with first-time homebuyers. Since then, I’ve gotten some feedback, and I noticed a number of people asking about demographics. Who are these first-time homebuyers? Based on a statistical survey from the National Association of Realtors, for the last four years, 34% to 36% of buyers coming on to the market have been millennials. This group is defined as the generation of people born after 1981—those between the ages of 37 and 17. Of those 36%, roughly two-thirds are first-time homebuyers, and the other 12% are buyers in their thirties who are often move-up buyers.

34% to 36% of buyers coming on to the market are millennials.
We can see the trend of mature buyers selling their homes to move into a retirement home, out of the area, or out of state at the same time that 12% of millennials are moving to a suburban area to look for single-family homes. Demographics are important. The selling season will be starting in the next two months, and the market is heating up. With that in mind, agents should know who their customers are so that when you go to sell, they’ll have an idea of how to cater to the buyers on the market. If you have any questions, feel free to reach out to me. I'd be happy to help you.

2017 Has Been a Good Year for Real Estate

Since the year is just about over, I thought it would be a good idea to tell you a little bit about how the market did over the course of the year.

As the year draws to a close, many of you have asked me how the real estate market did in 2017. I have good news to report to you about that. Stock values like the Dow Jones Index, NASDAQ, and S&P 500 have increased by about 25%, and the real estate market is doing well also.

In the market that I’m tracking for you, in 2016, we had an average price of $550,000 with an average square footage of about 1,780 square feet. Rounded off, it’s about $310 per square foot. In 2017, the average price is now $604,500 with an average square footage of 1,885 square feet, which amounts to about $327 per square foot. Between this year and last year, we saw about a 5.55% increase in the average price.

Based on this information, a person with an FHA loan who put 3.5% down (roughly $19,250) has seen their home value increase by another $30,000. This is about a 157% increase on the equity that they have on their home.

For a person who’s going for a more traditional approach, if you put 20% down (based on the average price, this would be about $110,000), that same $30,000 increase in equity gave them a 27% return on the equity, which is very good.

All in all, it’s been a very good year for our market.

The days on market has decreased from the 2016 average of 90 days to 66 days, which is in line with an observation I made in my August report. All in all, it’s been a very good year for our market, and I expect to have even better news come the new year.

If you have any questions about the market or real estate in general, please feel free to give me a call or send an email. Until next time, I wish all of you to have a Merry Christmas and a happy, healthy, prosperous 2018.

Seniors: Do You Know About Reverse Mortgages?

Hear two different true stories that demonstrate how reverse mortgages can help senior buyers purchase a home without adding monthly payments to their budget.

Today I’d like to talk about two scenarios, both of which are true case studies. In each scenario, a reverse mortgage helped the senior buyer to do away with their monthly mortgage payment.

The first refers to a home in Orange County for $950,000. The mortgage is still about $550,000. After the selling cost and the commission, the net amount is about $330,000. How would you buy a home for that amount in this current California market?

Since you’re planning to retire, you don’t want to worry about a higher mortgage. A solution to the problem is a reverse mortgage. This allows you to use the equity in your home to be converted into cash or a payment towards your mortgage, which means no monthly payment.

Since you’re planning to retire, you don’t want to worry about a higher mortgage.

The second scenario is about a single woman whose home is worth $550,000. She wants to move close to her children, and the home she’s interested in is $600,000. The solution here is similar: She can put $300,000 down and use the other $300,000 in a reverse mortgage so that she doesn’t have a monthly payment. She’s only obligated to pay the property tax and the annual homeowner insurance fee.

I have been able to put people into an investment vehicle like a Delaware Statutory Trust (DST) or in a TIC (tenant in common). For triple-net properties and A-Class, accredited types of investments, they can put it in and the return is between 5.25% - 6.25% depending on the offering from the sponsor.

Returning to the woman in the second scenario, with the $200,000 she has after the down payment of $300,000, she can get roughly an additional $11,000 to $12,000 a year in income that is fully sheltered.

Outside of this topic, I want to give a client named Quentin a shout-out. He told me about an area right here in Southern California with an affordable retirement community called Paumer Valley. You can find a 3-bedroom, 3-bath, 2,000 square foot home for $350,000. It’s a great community.

I’d love to hear from you. If you want to hear more about reverse mortgages for example, I’d be more than happy to bring in an expert to discuss your specific case. Just give me a call or send an email. Stay safe and stay happy!