Photo by Tom Rumble on Unsplash
This is from a California perspective and it will vary on your location in the country and in your state. Being a realist I want you not to be scared from selling and buying a new home but to be aware and prepared if you do.
Interest rates: The Federal Reserve has raised the interest rates once again and it is expected to be raised another quarter percent twice before the end of the year. According to an August New York Times "U.S. Mortgage Rates Jump to Highest Level Since 2002." It is now over 7% for a thirty year fixed morgage loan (read Article). With the potential two rate increases rise to over 7.5%. Lets say a home owner has a low 2 3/4% interest, do they want to sell buy another home at 7.5%? This is favorable if you have a very large equity in the home you are selling to use as a down on the house you are being.
Small Inventory: You are ok with the interest rate but now its time to find a home. A home owner may seek to sell their home but the market has a limited inventory of houses for sale. This has, for a few years, made it a sellers market but a challenge for the buyers. A home owner places their three bedroom, two bath home on the market and will find themselves with a possible twenty to thirty offers with 50% being good solid offers. Several offers come with a bio of the family that wants to purchase hoping you will be emotionally touched by their stories. Others have already sold their home and the cash is ready in the bank but they are getting desperate as they are living with family or renting. Others offer more than your listing amount in an attempt to insure their purchase. This is a scenario my wife and I experienced selling my father's house in 2021. In speaking to my realtor, recently, this situation is a regular one today.
So you have sold your house and are now on the hunt for a new one with a swarm of competition. You are living with family as you hunt, or maybe the RV trailer you own. Your choices are few because you are looking to upgrade to a larger home in a nicer area. So is everyone else.
Tract Home Purchase: But maybe you are looking for a new tract home to buy. This is possibly less stressful but even that market is small. Back in 2000 there was a recession and many home builders were caught with standing inventory or empty developed lots and no buyers. Sine then tract home builders builder smaller phases of less that 25 house instead of the 100 house phases they once did. Once those 12 to 25 house are sold they start another small phase. This then is also a challenge, however, it is simpler as it allows you to remain in your house while construction of your new house begins, allowing you to prepare for the selling of your old home and preparing for the future move when your new home is completed. However, the construction of a tract home, depending on the status of the house development project when you first contract with the builder, could be six months to a year.
Building a House: Building your dream house may be another direction you desire to take. You can go with a standard set of plans an architect or design firm may have or have the firm design you a fully custom house. A custom is more money for the plans and can become more expensive to build depending on the design. In either case you have a long process ahead. Let's approach this as if you do not own a lot to build on. Doing property searching may be as exasperating as purchasing a home. They are also few but the amount of purchasers are less as well.
Once you have your property there is time to design and draw the construction drawings, then plan submittal and permitting of the plans, if grading of the property is required then that triggers the needs for a civil engineer and surveying, soils testing is also required by a different engineering firm and maybe includes the need for a septic design depending on the location of the property. Time then from starting the design process to having a permit in your hands for a fully custom home could take as long as 1 -3 years. Banks loaning construction money typically will not sign contracts until plans are through this process. Also, banks like to see the property owned completely, though I have herd of some banks loaning money for the land purchase. So as you can see this is a much longer process and with the changing interest rates and economy can add further anxiety to your new home endeavor.
In closing. These are the major challenges in today's world of home buying and building. If you have quick questions or want to take further steps toward building your home you are welcome to contact me.
Bob Ybarra