For the past several years, the spring market in the Chicagoland area has started in January. We had great buyer activity and strong contracts in January, February and March. If you or someone you know is thinking about selling a home in 2018, now is the time to start preparing the home for the next spring market.
Home owner preferences are moving away from the togetherness of open floor plans. The open floor plan allowed families to be together more at home, but it comes with a lack of privacy and personal space. The traditional living room and the finished basement are in a revival because they offer the privacy for a phone conversation, watching a movie, or enjoying a great book. It could be that the man-cave was a great idea before its time.
When a family is not able to find that perfect move-up home, some will re-invest in their current home. If they like their neighborhood, schools and friends, some homeowners are opting to expand their current home by finishing a basement, building an addition or re-configuring the floor plan. In many cases, luxury amenities are being included because expanding can be more cost-effective than buying new. The longer-term upside is that once the kids are grown and moved out, the home may be a manageable space with a paid off mortgage.
The typical move-up buyers are couples in their 30’s to 40’s who need more space for their growing families. In our area, the common profile of a move-up home is a 2-story, 4-bedroom, 2 ½ bath with a finished basement and a 2-car garage priced between $400,000 – $600,000. The challenge for the move-up buyer is the lack of inventory in this popular niche because the current owners of these homes are staying longer. The recession prevented the current owners from moving to a luxury home years ago, some owners still don’t have enough equity, those that recently refinanced will stay put for a while yet. Recent empty nesters are waiting to see where their kids will settle before making a moving decision.
We want to believe that we can make money off flipping houses. There are still homes in poor condition on the market, and there is still a very strong market for beautifully updated properties since most millennials are not interested in fixer-uppers. There were more house-flipping investors in 2016 than there have been since 2007. Most of the serious investors have the process down to a science where they specialize in a specific style of home in a specific area. They know the market and have a measure of predictability with the budget. For the rest of us, experts primarily caution on over-renovating. Establish a renovation budget with the target sale price in mind. The other key consideration is location. You can fix the house, but you can’t change the location.
Fifty-six percent of buyers would sacrifice house square footage for more outdoor space. Larger yard space means extra privacy from neighbors, which is a big deal for people moving from an apartment or condo. More than just a big back yard, homeowners are transforming backyards into outdoor living spaces with expanded kitchens. This could make a 2,000-square-foot home live a bit like a 2,200 square-foot-home when the weather cooperates.
There are two types of international buyers. Recent immigrants to the U.S. and non-residents who buy an investment or vacation property. Five countries account for 51 percent of overseas purchases: Canada, China, India, Mexico, and the United Kingdom. Housing sales to international buyers makes up about 4 percent of homes sold. Chicago’s international appeal are its universities, transportation network, diversified economy and educated workforce. International buyers like properties in the U.S. because of the political and economic stability. In many cases, it is more affordable to purchase property in the U.S. than in the buyer’s home country. But buying property in the U.S. is a long and exacting process for international home buyers. They deal with government and bank regulations concerning money transfers and down payments. Mortgage financing is a substantial hurdle because their financial profiles differ from what lenders are used to seeing for most residential applicants. As a result, about 55 percent of international buyers paid for their home in cash. International buyers have very specific criteria and are now selecting homes from comprehensive data, photos and video of the home on the internet.
Recent graduates paying off student debt can find it difficult to save enough cash for a down payment. In addition, their high debt-to-income ratio may make it difficult to qualify for a mortgage. Fannie Mae announced several new policies in April aimed at helping graduates qualify for a mortgage. The first initiative can help borrowers who already own a home to convert their student debt into housing debt that carries a lower interest rate. The second initiative has the potential to change the way a graduate’s debt-to-income ratio is calculated, making it easier to qualify.