What’s the Difference? Fist Time Home Buyer vs. Move-Up Home Buyer

In today’s market we have very serious and very motivated buyers. Motivation is triggered by a number of different scenarios; either way though those who are ready to buy couldn’t find themselves in a better market than exists in Hemet CA today.

The National Association of REALTORS® (NAR) recently published a study, 2007 Profile of Home Buyers and Sellers that did a very in depth analysis of who the buyers and sellers are in this current market. I recently reported on how many buyers use the Internet and how they use it.

In this article I want to look at the differences between the two different types of buyers – First Time vs. Move-Up. Bear in mind as you look at this data, it may not be exactly what happened here in Hemet or in any other part of the country, it is typical of what happened across the entire country.

Move-Up home buyers often trigger their desire for a new home based on a number of different scenarios. One of the most common is a change in life style – either the kids are all gone or they are new parents. Either way, a new home is very typical in this type of situation. Success in a career and the desire for a status symbol in an expensive neighborhood is another common scenario that will trigger the desire for a new home. Perhaps now that the kids are gone, it is time to down-size and maybe find that perfect home on a golf course or lake front with your own dock.. Maybe you enjoy entertaining and want a space designed to accommodate large groups and social events.

These are some of the more common reasons given to NAR on why more than half of home sellers are looking to trade up to a larger home.

First time buyers are taking advantage of this market because just a year ago they felt priced out of the market and thought they would be renters forever. Inventory levels are high, so there is a great selection of homes, interest rates are near a historical low and prices are definitely down into the obtainable level…perhaps even approaching affordable again.

Moving Up In a Down Market

One of the biggest issues move-up buyers have is selling their home. They still think they should be able to get top dollar for their home and yet they want to buy at bargain basement prices. I often explain a theory I call Moving Up in a Down Market.. In it’s simplest explanation I’ll use a home seller whose home was once worth $300,000, but has suffered a 24% drop in value now making it only worth $225,000. At the same time, they have their eye set on a REO home that just a year ago was sold for $500,000. Today, that half a million-dollar home has also suffered the same 25% drop in value, pricing the home for only $375,000. The difference between the two drops is $50,000 = pure profit (and tax free).

So, to take advantage of the move up market, you have to be willing to let go of the old home (unless if you want to be a landlord – but that’s another story).

Plan the Move-Up

Moving up to a new home is not something that should be done on a whim. To truly take advantage of the opportunities that can be found in the Hemet real estate market, it is important to properly position yourself. To do so, I advise you take a look at these three important (ok critical) points.

Know Your Goals: Don’t think short term. Most homeowners will stay in their home for 5 to 7 years – sop plan ahead and make sure what you are investing in today will satisfy your family needs for the duration of that period. It may be better to extend yourself a little bit now than to find yourself having outgrown your home in only 2 or 3 years. Considerations to take into account include the size of your family – will you be adding children or will they be moving out? Will an elderly or handicapped parent or relative be moving in with you? Do you need an office to work from home? How about RV space? The bottom line is just know what you need and don’t compromise, or you’ll regret it before you have outlive the home.

Financial/Credit Status: Is your credit score where it should be to get the best loan possible? Do you have enough of a down payment saved up? Are their obligations you can take care of before you start applying for a loan, to position yourself in the best possible light? Just remember that every point on your credit score makes a difference and know that the middle credit score is typically the most important. By middle, I am referring to the middle score of the three major credit bureaus – Equifax, Experian and TransUnion.

Budget: In 2007 many loan programs all but disappeared. You will have to speak with a local loan officer or mortgage broker to determine what type of loan is best for you. In looking at the alternatives, the loan office will be looking at your debt to income ratio. So make sure you have as much paid off and down as possible before you start the process. A good local lender will be able to work with you . Many homeowners who move-up, typically will increase the value of their home by about 150%. So a $300,000 homeowner will be looking in the $450,000 range. Increases in move-up mortgage payments will typically be between and additional $1,000 and $2,000 a month. Make sure this fits in your personal financial plan. On a final not on this topic, I would highly recommend a conservative fixed rate loan as your only alternative – don’t get locked into a loan that has surprises in a few years…if you don’t believe me, look around at all of the REO homes in your current neighborhood. Enough said.

So, Lets Look at the Differences…

I may have gotten a bit off topic, when I started this article, I just wanted to show the differences between a first time home buyer and a move up homebuyer…

Trends of the Repeat Buyer

79% purchased a DETACHED Single Family Home (67% of first time buyers bought a detached SFR)

42% Sold & Purchased a home in Suburban areas (like Hemet)

Median Size of Move Up home buyers is 2,015 square feet of living space. (1,510 square feet of living space is the median size first time home buyer home)

Average Age of a Move-up Buyer is 46 years old.

The Median Income for Move Up Buyers is $85,700 (The median income of first time buyers is $58,600)

Why a Move-Up Buyer Buys…

17% want a larger home.

17% move for a job.

10% of moves are the result of a change in the family situation.

9% desire to establish a household.

7% just want to be closer to family and friends.

I hope you have found this information provide by the National Association of REALTORS, along with my own commentary to be both useful and interesting. Now if you would like to see a great deal on either a first time home or a great move up property, we have more than our share available in Hemet right now. Many wonderful deals can be found in the REO market, which I have many listed under my name as well as access to all in the market. So please, drop me a line and lets find you and your family that perfect home.

Now Have a Blessed Day,

John Occhi, REALTOR®
Century 21 Crest - CrestREO
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

Author of "What You Need to Know...About Foreclosure and How You Can Stop It!" - If you are a Hemet or San Jacinto Homeowner.

This blog and the contents written here is the intellectual property of John Occhi, Hemet California REALTOR®. The views and opinions expressed are just that - views and opinions of John Occhi and those who comment. Please note that I am not an attorney or a tax professional and any time I discuss either topic, I suggest you consult with the proper professional for relevant assistance.

This blog is part of the ActiveRain Real Estate Network, which is a social network highlighting the best of Web 2.0. Information is provided with the intent of educating and assisting home owners, home sellers, home buyers and real estate investors with information the can be used to make better real estate decisions.

I am proud to be a full time REALTOR® with Century 21 Crest and the CrestREO Division who is proud to be a contributing member of the ActiveRain community.