It's become obvious to me that we are in the beginning stages of a new housing bubble. I look around me and can see that homes of the same size and in the same condition that sold for only $95,000 only one year ago are now selling for $155,000. According to a recent article by AP, new homebuilders are feeling more confident than ever. In fact, a survey of homebuilders by the National Association of Home Builders/ Wells Fargo shows confidence is at a 7-year high. I don't even have to read about builder sentiment to know it's true. Living in South Florida, I can hear the buzz of new home construction in subdivisions that were like ghost towns when the housing market crashed. As a person who bought at the top of the bubble, I learned a few things that will change how I act with this new housing bubble.
Buying low, selling high
Although buying low and selling high works with stock market investments, it doesn't work with houses. My family needs a place to live. I can't sell my home just to make a profit. We purchased our single-family new construction home for about $180,000 about one year before the market crashed. We had locked into the price through an agreement with the builder about two years before the market crashed. We could have made a profit of about $40,000 to $50,000 if we sold our home within that first year of owning it. Even if our home shoots up in value to $200,000 or more, we aren't selling.
Personalizing our home
One of the big trends when we bought our home was to decorate with all neutral paint colors and not do anything that other buyers wouldn't like. It was absurd advice to give to homeowners like us who intended to actually live in their own home. I'm not going to start making renovations and improvements to my home with the next buyer in mind. I wasted thousands of dollars during the first housing bubble by putting down floors that other people would like and painting the home colors that wouldn't offend the next owner.
Paying the new home premium
A lot of people are unwilling to pay more money for a new construction home compared to a resale home. I don't regret buying a new home, but only because I was younger. I could afford to make larger house payments. In fact, my husband and I are working on paying off our mortgage in 15 years instead of 30. If we had some unexpected circumstance which forced us to move, I wouldn't purchase a new home because we are no longer in our 30s. I sometimes feel as though we paid a premium so we wouldn't have to worry about the high cost of replacing appliances and the upkeep required for an older home. With this new housing bubble, the new construction homes are selling for about 20 to 25 percent higher than older homes in my area.
As a parent with children in their late teens, I am worried about the new housing bubble. I know it may shut them out of the housing market, especially since the top of the bubble may hit about the time they want to buy. I don't think the prices at this point have vaulted to the top, but they are headed in that director. It shocks me how quickly the prices are going up, but I know firsthand they can go back down in a heartbeat.
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