Selling a House? Homeowners Are Seeing Record Gains
The housing recovery is reminding home sellers what it feels like to cash in on a bull market. In fact, an impressive streak of home appreciations across the country has sellers experiencing their biggest gains in eight years.
Homeowners who sold during the third quarter of 2015 realized an average price gain of $40,658 from the purchase price of their property, according to a new analysis from RealtyTrac. That represents an average price gain of 17% and the highest average gain since the third quarter of 2007. Sellers had owned their home for an average of 6.72 years when they sold, while the average sale price of single family homes and condos nationwide totaled $263,976.
“An increasing number of homeowners in 2015 have been cashing out the home equity they’ve gained during the housing recovery of the past three years,” said Daren Blomquist, vice president at RealtyTrac, in a press release. “That may be a good decision because the data points to a plateauing market going forward. Home price appreciation is slowing, a trend that will continue if interest rates rise in the coming months as expected.”
RealtyTrac analyzed 171 counties with at least 500 sales in the third quarter and where home price data was available both on the most recent purchase and the previous purchase. Counties where sellers on average sold for the biggest percentage gain in the third quarter were San Francisco County, California (58.7% gain), San Mateo County, California also in the San Francisco metro area (55.7% gain), Santa Clara County, California in the San Jose metro area (47.7% gain), Alameda County, California in the San Francisco metro area (43.1% gain), and New York County, New York (41.6% gain).
Despite the strong gains, the real estate market is slowing. Out of 135 counties with at least 1,000 sales and home price data available in the third quarter, 55 counties (41%) posted year-over-year decreases in average home prices. RealtyTrac also finds that the share of cash sales fell to the lowest level in seven years, while institutional investor share declined from 5% of all sales to only 1.9% of all sales. If the big players are getting out of the market, are the good times about to end? Does it even matter to most homeowners?
Home equity tends to burn holes in pockets. When a homeowner sells a house, they more often than not then become a homebuyer, seeking an even larger house to keep the equity snowball rolling. A larger home is also something people strongly desire — we are, after all, a nation of consumers.
Since the 1950s, the average square footage of the American home has increased every decade, according to research from RealtyTrac. A modest 1,400 sq. feet average in the 1950s has been super-sized to today’s average of 2,312 sq. feet. Unlike the Great Depression, when the average home size declined slightly in the aftermath, the housing bubble collapse of yesteryear failed to reverse the trend of larger homes.
A recent analysis from Trulia reveals only 40% of respondents say they are living in a home that’s their ideal size, while 43% believe their dream home is somewhat or much larger than their current residence. Only 16% say their ideal home is smaller than their existing home. Several factors influence whether people desire a different-size home, but every generation as a whole shows a bias toward a larger home. Even baby boomers, who might have an empty nest and be nearing retirement, prefer a larger home.