Three (and one half) Theories

One of the more confounding things about today’s — shall we say — “unusual” housing market is the conspicuous absence of what Realtors used to call the “sweat equity” Buyer.

In no particular order, here are the three explanations I hear most often — and find most credible.

One.   Soft Economy – Part A. 

It’s one thing for someone with strong credit scores (mid-700′ s or above) to go get a (very) cheap mortgage:  interest rates on 30-year mortgages are now well below 4% for strong borrowers.

However, not so many people these days have another liquid $100k — or $200k — available to pay for that new Kitchen — plus new windows and a new Bath (or two).

Two.  Fewer HELOC’s (“home equity line of credit”).

Of course, when you could go borrow that $100k or $200k against your home — via a cheap home equity line of credit — you didn’t have to have a liquid $100k or $200k lying around.

However, that was before banks got burned by overly lax lending standards on HELOC’s.

Now, such loans are difficult and/or expensive for most borrowers to obtain.

Three.  Soft Economy – Part B.

The flip side of a soft economy is that the people who have jobs seem to be working harder.

That’s what happens when the remaining work force picks up the slack created by serial lay-off’s (“downsizing”).

Of course, if you’re already working a 60 hour week, it can be hard to find the time to oversee a major remodeling project.

Or several of them.

Suffering by Comparison

And then there’s what I’ll Reason #3.5:  in today’s Buyer’s market, the homes that are selling are typically well-staged, and in “mint” or “move-in” condition.

Buyers who are accustomed to seeing such homes are likely to be turned off by ones needing extensive updating.

P.S.:  See also, “Buying the House — But With No Money Left Over.”

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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