By Jim Hagerty
Gone for now are the days when retirees and empty-nesters were the largest groups of homeowners with the need to downsize. Today, even young families—some with multiple children, are leaving their larger homes in favor of smaller quarters. For most, the alternative is becoming house-poor, or worse yet—foreclosure. Many aren’t taking the gamble. Instead, priced smaller homes are becoming a hot item, especially in the Midwest where manufacturing hubs are being turned upside-down by one of the worst economic downturns since the Great Depression.
The shift has resulted in a more than 50 percent spike in November home sales locally. According to Rockford Area Association of Realtors officials, 360 homes, including condos, were sold last month, 127 more than November last year.
As owners move out of larger homes, prices continue to fall. The average Rockford-area sales price has fallen from $130,199 to just more than $124,000, according to a rolling three-month average.
First-time buyers armed with a federal tax credit, now extended to April 30, 2010, continue to drive the majority of activity and will now compete with other tax-credit qualifiers. Select existing buyers now qualify for up to $6,500 in credits. With about 23,000 area homeowners reportedly eligible, sales are predicted to increase when the government removes its hand next spring.
While larger home prices fall, look for a slight price increase on smaller homes before the market corrects itself. It’s not likely by April; however, as those who can truly afford bigger, more luxurious dwellings trickle to the closing table, the front will likely be led by middle-income families who take advantage of relatively large savings without overextending. Most will realize they can buy a considerable amount of house for today’s dollar, with the wise forgoing luxury in the process. Still gone, but not forgotten, are the days when lenders financed more than just the American dream and began floating the American fantasy.
Tax credits and market quell should also have an impact on the homebuilding industry, moving into next year. Despite most of home-owning America still in nesting mode, some are finding major remodeling projects simply won’t pay off soon enough, and building a new home is, dollar-for-dollar, a better investment.
From the December 9-15, 2009 issue