Moving from a two-bedroom home to a three-bedroom home can cost owners around $450 extra per month in mortgage payments, with the figure considerably higher in popular coastal markets, according to Zillow's latest Cost of Moving Up Analysis.
Owners who trade up in the Midwest, particularly in Chicago, Cincinnati and St. Louis, see the lowest premium increases, averaging $150 per month. In Cleveland, the move adds just $74 to monthly mortgage payments. Meanwhile, owners in San Francisco and San Jose stand to almost double their monthly payment.
Additional bathrooms followed the same rule as bedrooms, according to Zillow, making renovations to add an extra bedroom or bathroom a value-add for existing-home owners seeking to benefit from today's seller's market.
The need for existing owners to trade up is growing as the market faces mounting pressure from high demand and insufficient inventory, particularly at the entry-level price point.
According to the latest quarterly Housing Opportunities and Market Experience survey from the National Association of Realtors, 69% of homeowners in 2017's first quarter said it was a good time to sell, while 80% reported that it was a good time to buy a property.
This cycle stands to further hamstring the market as it pushes away potential buyers and, in particular, first-timers, who accounted for 35% of home sales in 2016, according to the NAR. Employment gains and slow-but-sure wage growth stand to further bolster demand for owned housing among this demographic.
The persistent labor shortage and the increasing cost of doing business for builders has also been a drag on creating new inventory. Still, industry observers have been optimistic about recovery, citing strong market fundamentals. The latest housing starts and new-home sales reports were positive and, along with an increase in construction employment, could underpin such confidence and indicate more new construction activity ahead.
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