This Week’s Highlights:
- Another interesting home sale statistic article
- Homebuyers are feeling (rightfully) discouraged
- Difference between primary and secondary residences
National and state-wide home sale statistics
An article by Nicole Friedman for the Wall Street Journal started with the headline, “US Home Prices Pushed a Record High, Slowing Pace of Purchases.” The sub headline mentioned that the cost of existing properties is up an average of 19% nationwide. Whew, that’s quite a bit!
Here’s the thing: Saying that home sale prices are up an average of 19% nationwide is similar to saying that the temperature was an average of 60 degrees nationwide. Some places might have been 90, others 30. So this doesn’t paint a super clear picture for what’s going on in the metro Milwaukee area.
The median home sale price in Wisconsin WAS an all-time record high at $235,000, but that’s only a 9.9% increase statewide year over year, compared to the 19% national average increase.
Homebuyers are getting preemptively discouraged
We have a client who has regained their first time homebuyer status. How do you become a first time home buyer again? Well, the real estate definition of first time home buyer is someone who has not owned or purchased a home within the past three years.
They’re semi-retired, in their 70s, and have about $18,000 in non-retirement savings. They also have about $62,500 in a Roth IRA. So, that’s available for a downpayment if they need it, but we don’t recommend dipping into retirement investments for obvious reasons:
- You need to pay taxes on it if you’re under 59.5, which they’re not so they’re safe, but also
- It’s for retirement! So not the best idea to dip into that for a house if you can help it
So all we do is add that into their pre-approval letter because they COULD use it for a downpayment, but they don’t NEED to just because it’s in the letter.
But now here’s the kicker: They found the cutest updated 1920s house that would be perfect for them. It was listed at $210,000, so we planned to give them $15,000 in wiggle room. We’re so grateful that their real estate agent was super honest with them about what it will realistically cost. He said there’s no way it’ll sell for less than $30,000 OVER asking price, without including an appraisal contingency.
We were able to write an offer for $40,000 over the asking price, as long as the appraisal came back at the asking price. With sales like this going on, home shoppers are scared to even throw their hats in the ring. So many people are preemptively opting out of buying a home until there isn’t so much pressure to settle for something they might not even want at such a high price.
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Client gets a new secondary home: Here’s what that looks like
We have a client who we originally helped buy a second home in Florida. He then made that his primary residence, and is now looking for a lakehouse in Manitowoc County as his second home. The biggest difference between getting yourself a primary home vs. vacation home? Basically, you’ll need to put a little bit more down for the second home.
Fannie and Freddie have started to differentiate between the pricing on a primary home versus a secondary home. It’s not huge, just about an eighth or a quarter different than a primary home, give or take depending on the property. Loan size is also going to be a huge factor: the bigger the loan needed, the bigger the difference between primary and secondary.
I’m offering $299,000 on a primary residence, it’s going to be $325,000 to buy the same place as a vacation home. This is for loan amounts $548,250 or less, or to maintain that rate. You can pay 1% of the loan amount or one point to get the same rate as you would on a primary residence.
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