Math smiles on move-up buyers

Molony stressed that price declines and low interest rates have combined to offer buyers “record affordability,” as calculated by its national index. The national number is currently 167, which means that median income households can afford homes that cost 167 percent of the median price.

While rising prices can push affordability down, realtors point out that rising interest rates can work against would-be buyers much more quickly. A one-point hike in interest rates boosts monthly mortgage payments the same as a 10 percent increase in prices.

“The affordability conditions are optimum right now,” Molony said. “We will be seeing a little pressure on rates later this year. It’s really hard to time the bottom of the market, which will be apparent in hindsight. If we aren’t at the bottom of interest rates now, we’re within an eighth of a point.”

Zawideh, the Michigan agent, said he asks clients who are nervous about moving up this question: “Where do you want to wait for the market to turn around?” He points out that just as market declines are leveraged by the total value of the house, so too is appreciation. “Where the market turns around, wherever you’re sitting, it’s going to turn around for you there, too.”

Despite that logic, some agents still find it hard to persuade homeowners coveting bigger places to sell their current houses for tens or even hundreds of thousands less than they could have gotten a few years ago, especially in higher value areas.

“Sellers seem to still be frozen in time,” with many unable to set realistic prices, said Sandy Wallace, an agent in Santa Cruz, Calif., where values are down about 30 percent from their highs in 2006, knocking the median price of a home from the $800,000’s to the $600,000’s.

Pricing their condo to sell quickly — they were in escrow within three weeks — was exactly what positioned the Kirstens to make a winning offer on the Washington state home of their dreams.

Struggling for the right price
“We struggled for quite a while,” Lori Kirsten said, touring many competing listings before settling on an asking price of $199,900, which they received, less a few thousand dollars in concessions to the buyer.

Their agent, Jess Beyers of nearby Bellevue, said he is starting to see more move-up clients like the Kirstens, ready to lower their expectations on sale price to gain on the purchase side of the equation.

“I don’t know that they really do the math to the extent that they say, ‘I lost 20 (thousand dollars) on the condo but I saved 40 (thousand) on the house,’ as much as they say, ‘Wow, we couldn’t buy that place two years ago, but we can afford it now,’” Beyers said. “I don’t want to be the one to talk people into buying real estate or moving up right now if they don’t already have a good reason, but if you’re on the fence then this is one of the benefits you might gain.”

Surveying the newly remodeled kitchen and gleaming wood floors of his new home, more than four times the size of the condo he left, Chris Kirsten agreed. “We’re happy,” he said. “No regrets.”

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