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.”