Taking the Bait

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54 | Th e M Rep o RT o r i g i nat i o n s e r v i c i n g a na ly t i c s s e c o n da r y M a r k e t ANALYTICS the latest sellers taking More risks with Prices More homeowners are overpricing to maximize their gains, but that's not the best way to go. a s home sellers become more confident in the housing market, many are taking on what Redfin calls a "risky pricing strat- egy," according to the online real estate brokerage's latest survey. A little more than 40 percent of home sellers plan to price their homes above market value, Red- fin's data shows. More than half—52.4 percent—of home survey respondents said now is a good time to sell a home in their neighborhood, as of the second quarter of this year. This is up from 45 percent in the year-ago quarter. Regardless of this bolstered con- fidence, Redfin warns overpricing a home is not a wise strategy in today's market. "Buyers this year are far less tolerant of overpricing, and homes that aren't priced appropriately are likely to sit on the market until the seller is forced to reduce the price," said Paul Reid, a Redfin agent in Riverside, California. Furthermore, dropping the price on a home can send a negative message to buyers, according to Reid. "Buyers often interpret a price drop as a sign there is something wrong with the home, leading some to negotiate even more aggressively or lose interest altogether," he said. About 51.3 percent of sellers plan to price their homes in the mid-range of local comparables, which is advisable, according to Redfin. While sellers may be gaining confidence that their homes will sell, they do harbor concerns regarding their next home purchases. Affordability was a top concern in the second quarter, cited among 40.9 percent of sur- vey respondents. Competition and low inventory also ranked high, cited among 36.5 percent and 35.6 percent of respondents, respectively. On the other hand, concern over rising mortgage rates is waning. About 19.9 percent of respondents cited this concern, down from 22 percent in the previous quarter. Rising prices have led some home sellers to regain confidence that a home purchase is a good investment, but the trend hasn't convinced everyone. Price gains over the past year led 30 percent of home sellers to say they feel more confident in the security of a home investment. However, 60.2 percent say rising prices have not affected their con- fidence in the security of a home purchase, according to Redfin. Mortgage debt among seniors on the rise Nearly one-third still paying well into retirement. W hile the home- ownership rate among Americans age 65 and older has remained at or near 80 percent for the past decade, the percentage of older Americans with outstand- ing mortgage debt has increased since the start of the housing crisis, according to a report released by the Consumer Financial Protection Bureau (CFPB). About 30 percent of older Americans hold mortgage debt as of 2011, according to CFPB, up 8 percentage points from 2001. The rate increased even more dramatically among those age 75 and older. In 2001, 8.4 percent of those 75 and older had outstand- ing mortgages, while 21.2 percent had outstanding mortgages in 2011, according to CFPB. About 4.4 million Americans are retired and still paying on their mortgage loans, according to CFPB. Not only has the percentage of older Americans holding mortgage debt increased, but so too has the amount of debt these seniors owe. In 2001, the median outstand- ing mortgage debt among older mortgage holders was $43,300. As of 2011, the median debt among seniors with outstanding mort- gages was $79,000. "A home can be a place of security for older Americans in their retirement years—a roof over their heads as well as a valuable asset," said CFPB director Richard Cordray. "But as more seniors carry significant mortgages into retire- ment, they put themselves at risk of losing their nest eggs and their homes," he added. In fact, the serious delinquency rate among seniors—the rate of those age 65 to 74 who were 90 or more days past due on their mortgages—rose significantly dur- ing the financial crisis. Starting at a rate of 0.85 percent in 2007, seri- ous delinquencies among seniors rose to 4.96 percent by 2011. "While delinquency and foreclosure rates have decreased since 2012, foreclosure among older homeowners is still a significant problem," the CFPB stated. About half of retired seniors with mortgage debt pay more than 30 percent of their household in- come on housing costs, CFPB says. Factors contributing to the ris- ing rate of older Americans with mortgage debt include the refi- nancing boom of the 2000s and "a general trend among Americans to buy their first home later in life, provide small down payments on home purchases, and borrow against their home equity to pay for a variety of expenses," accord- ing to CFPB. "Buyers this year are far less tolerant of overpricing, and homes that aren't priced appropriately are likely to sit on the market until the seller is forced to reduce the price." — Paul Reid, Redfin West Seasonally adjusted March sales rate: 80,000*

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