Is the ‘Move Up’ Buyer Starting to Feel Stuck?

August 3, 2011

More home owners who want to trade in their current home to buy a larger one are holding off, feeling trapped by a sluggish housing market and the loss of equity in their current home, The Los Angeles Times reports. 

“Potential move-up buyers ... are largely sitting on the sidelines these days, leaving a key part of the housing market stuck in neutral,” The Los Angeles Times' article notes. “The promise of rising prices and upward mobility, once a powerful force in the American housing narrative, has been all but shattered by the downturn.” 

Move-up buyers are often classified as home shoppers looking in the $300,000 to $800,000 price range, according to the research firm DataQuick. Home sales dropped the most in that category in June, dropping 25.5 percent from June 2010, according to DataQuick. On the other hand, sales of homes priced below $200,000 dropped 11.4 percent from June 2010 and home sales priced at more than $800,000 fell 17.6 percent. 

The “move-up” category creates a chain of buyers and sellers that is important for a healthy real estate market, since trading up “fuels price gains and helps home owners to build equity,” The Los Angeles Times' article notes. 

"The way to think about [it] is a chain of trades that normally occurs, and if that chain is broken at any point, or it doesn't begin because you don't have enough entry-level buyers, then the whole dynamic of the marketplace is affected and the level of resales is going to be very small," says Ed Leamer, director of the UCLA Anderson Forecast.

Source: “Home Owners Who Want to Trade Up Are Stuck Waiting,” The Los Angeles Times (Aug. 1, 2011)

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