“Unless you bring more cash to the table, you can’t trade up.”
Keith Jurow, the Capital Preservation Real Estate Report
Folks want to trade up, same as ever. Life events like expecting a baby or a raise in income drive demand in trade up homes. Making the prospect even more attractive, interest rates are at near historic lows below 4%. The ability of homebuyers to trade up influences the fortunes of the entire real estate market from first-time buyers to downsizing empty nesters.
When buyers trade up, they create housing inventory in the price range they are leaving. They also provide an opportunity for the seller of their new home to downsize, if that’s their goal. The whole dance of trading up and trading down becomes a virtuous spiral that drives the whole market and puts people in the homes that meet their needs. But a lack of cash for down payments can stop the wheel spinning in its tracks. In fact, existing home sales have declined to their lowest rate in 9 months, most notably seen in the West and Northeast parts of the country. Lawrence Yun, the NAR’s chief economist, said potential buyers last month faced rising prices and fewer choices as housing inventory declined from November. “With interest rates at lows not seen since early 2013, the strength in existing sales in upcoming months will largely depend on the willingness of current homeowners to realize their equity gains from the past couple years and trade up,” Mr. Yun said in a recent release from the National Association of Realtors.
Unless trade-up buyers have another source of cash for their next home, they may lack enough equity in their current home for the down payment. Facing this hurdle, buyers may be unwilling to sell their current home for less than they list it for. This seller reluctance is choking the market, according to a new article in Time. Homeowners are sitting it out, waiting to sell until home prices have gained enough to net the full asking price. But by waiting, these trade-up buyers might miss their chance to purchase their dream home – considering inventory is also tighter than it has been historically.
REX HomeBuyer opens the floodgates with equity.
REX HomeBuyer makes equity investments in individual home purchases by providing down payment cash to buyers. Through this program, FirstREX will typically provide up to half the down payment needed to buy a home. The money from FirstREX is an equity investment, not a loan, which means there are no monthly payments or interest. Instead, FirstREX earns a return from part of the appreciation, if any, when the homeowner decides to sell – up to 30 years later.
A REX HomeBuyer equity investment may be all that’s needed to get potential trade up buyers off the fence. They won’t have to worry about clearing enough from the sale of their current home, and they can be sure of having enough cash for the down payment without committing all their liquid assets. If you are considering trading up, take a look at the REX HomeBuyer program. It may be just what you need to ease your way into trading up to the home you really want.