January 3, 2013

Is this a good time to sell my current home and look for new senior housing?

danBy Dan Dolan
Dan Dolan Homes

In my weekend open house visits with seniors who are thinking about moving into new housing, the issue of “when is it a good time to sell my existing home,” is of paramount interest. With good reason. Most of us look to the equity in our existing home to provide the source of the down payment or even the purchase funds for the new home. Moreover, we don’t usually want to own two homes—the existing one and the new one. So, the question of “when to buy?” is closely related to the question of “when is it a good time to sell?”

I have the answer to both questions: “NOW.” Here’s why:

• Buying the new home. We have all seen the government statistics indicating that some 10,000 seniors are retiring every day. And, we observe that with retirement often comes a desire to alter the current lifestyle. More travel. Greater flexibility. A desire to downsize the living (and maintenance) space and finally have everything on one floor. No more laundry in the basement, etc. This generally requires selling the existing home and moving to a smaller home with more quality-of-life amenities. For some seniors, it also means moving to a new community in order to be closer to family.

Over the years that I have observed this trend, I have also come to understand that the longer it takes to make this lifestyle change, the larger the gap between the sale price of the existing home and the cost of the new home. The reason is understandable. The cost of new homes rises faster than the appreciation of existing homes. While roofing, windows, utility systems, etc. in the current home are getting older, the new home includes all the state-of-the-art improvements to make it more energy efficient and more comfortable. To put it another way, many of the increased costs in a new home reflect higher performance and higher quality amenities such as more efficient utilities, better insulation, low-e windows, the use of more expensive materials such as hardwood flooring, granite countertops, etc. In summary, the longer one waits to buy the new home, the greater the gap between the sale price of the existing home and the purchase price of the new home. By purchasing that new home now rather than later, the out-of-pocket cash outlay is generally lower than it will be next year.

Above and beyond the cost factor of the home is the likely increase in financing costs. While no one knows for certain, the current mortgage rates are more likely to go up rather than down in coming months, and that could reduce the number of qualified buyers for the existing home. The higher the interest rates, the higher the monthly payment and fewer buyers who can qualify for financing.

• Why now is a good time to sell the existing home? While many areas of the country saw dramatic declines in home sales during the recent economic downturn, we were less adversely affected here in the Quad-Cities. Home sales held up fairly well, but fewer sellers put their homes up for sale fearing they would not sell. Accordingly, the home inventory shrank, and today the number of existing homes on the market is lower relative to sales. To put it another way, we really need listings.

Additionally, local mortgage providers have made funds available for buyers and interest rates have remained low (so far). Accordingly, some local real estate firms will be reporting very strong 2012 sales, with Ruhl&Ruhl Real Estate showing dramatic year-over-year performance increases. When the 2013 market begins to pick up, traditionally after Super Bowl Sunday, we fully expect buyers to be in the market very aggressively, and available listings will get very active showings. I’m suggesting to prospective buyers that they consider listing their own home shortly thereafter, in order to attract the early buyers.

We have been very fortunate at Dan Dolan Homes and 2012 sales have been outstanding. We will have several new homes available for spring delivery at our sites in Davenport, Bettendorf, Blue Grass and elsewhere. We encourage potential buyers to come out and visit with us weekends early in the year to see what we will have available and to select their preferred locations and amenities. At this point, it is still possible to select wall colors, floor coverings and counter top options in many of our homes under construction. At our open houses, our realtor hosts will be happy to work with you in designing your dream home. Of course, I am always available to do likewise and to answer any questions you may have. If a new senior home is in your plans in 2013, we want to be your builder of choice and to assist you in marketing your existing home to achieve the best possible sale. Come out and see us soon.