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Last week we learned that housing prices grew rapidly yet again in January.

The widely followed S&P CoreLogic 20-City Home Price Index was up 19.1% compared with January of last year — a blistering pace, especially considering that the growth was on top of the 11%-plus growth rate reported for January 2021.

It’s highly anomalous for housing prices to rise over 32% in a span of two years, and so the trend is causing some economists to start worrying about a possible bubble.

In the chart below, you can see the acceleration in prices that has occurred over the past year and a half. The growth rates we are now seeing exceed those immediately preceding the Great Financial Crisis.

That’s enough to make anyone a little nervous, especially now that mortgage rates have risen to nearly 5% from a low of around 2.7%.

 

But there is one big difference between today’s bull market in housing and the one that ended so badly more than a decade ago. Generally speaking, we are not seeing the kind of speculation that was so rampant back then.

We don’t see “investors” buying multiple condos with the expectation of selling them at a large gain within a matter of months. And we don’t see the critical ingredient that made this “flipping” activity possible, which was the ready availability of credit on very easy terms.

Fortunately for all of us, the trauma of the GFC was enough to teach banks and regulators a lesson they won’t soon forget.

Shady lending practices, to include very small or even no down payments, adjustable-rate mortgages, mortgages without proper documentation, teaser rates, pay-option ARMs and inflated sales appraisals, are not contributing in any meaningful way to the strength in housing prices we are now seeing.

And more critically, there is only a very limited market for bonds backed by sub-prime or Alt-A mortgages, keeping origination activity for unqualified borrowers limited as well.

The strength we are seeing in today’s housing market has a much more straightforward explanation.

Rather than speculation and easy credit, there has simply been a large mismatch between the supply of and demand for housing, and the mismatch is especially pronounced for lower-priced, entry-level homes.

On the supply side, it has become fairly obvious that new home construction has been far too low since the GFC.

It’s understandable that homebuilders would be skittish in the years immediately following the collapse of the housing market. But the construction deficiencies have endured up through present day.

Some of the factors inhibiting building activity include a severe shortage of labor; supply-chain disruptions associated with trade wars and Covid; rapid inflation in raw materials; and land shortages driven by zoning restrictions and land-use regulations.

These headwinds to more rapid construction have only intensified, and so supply is likely to be constrained well into the future (which could support elevated housing prices). The chart below shows that at the current sales pace, there is only two months of supply available for sale.

The growth in demand for housing, which has accelerated materially in just the past few years, is related to several factors as well.

The first and most obvious factor is that a large demographic segment, the Millennials, are reaching the age when folks typically buy homes. Some Millennials had deferred homeownership until now due to inadequate incomes or savings, but now that the job market has improved dramatically many are deciding to take the plunge.

A second factor is the trend toward “work from home”, or “WFH”, which many believe will be a lasting legacy of the COVID pandemic. Given that these sources of demand are highly unlikely to abruptly reverse, it seems that demand is likely to remain elevated well into the future.

All that said, today’s bull market in housing would not have been possible without the artificial suppression of interest rates by the Federal Reserve.

This heavy dependence on ultra-low mortgage rates creates a problem now that mortgage rates are rising.

Housing affordability is determined by three things: household incomes, the cost and availability of financing (mortgage rates), and housing prices. All three of those inputs have been rising, but increases in the two that decrease affordability (housing prices and mortgage rates) are more than offsetting growth in the one that increases affordability (household incomes).

You can see in the chart below that housing affordability had already dropped quite significantly from the highs in 2012-2013 to the most recent reading for the fourth quarter of 2021. And a lot has happened since the end of last year.

We suspect that with the continued increase in home prices this year and the big surge in mortgage rates to nearly 5%, the affordability reading for the first quarter of 2022 is going to be much lower (even though household incomes have continued to grow).

Higher home prices and strong demand are obviously good things for homebuilders.

As you can see in the chart below, homebuilder sentiment is quite elevated right now. But the increase in home prices and spike in mortgage rates, coupled with the relative dearth of listings, has led many prospective buyers to throw in the towel.

It’s hard to argue with that. But it is critical to remember that if the number of listings remains as depressed as it is now, a much smaller number of willing buyers is needed to keep prices going up.

The housing sector is very important to the U.S. economy. Artificially suppressed interest rates undoubtedly pulled forward some home price appreciation, and the massive appreciation in home prices to date will, unfortunately, lock some prospective first-time buyers out of the market.

But it’s hard to see any kind of crash similar to the GFC. Demand is simply too strong while supply is too limited.

Source: CNBC.com, Michael K. Farr and Keith B. Davis

Before you can make the transition from renting your home to owning your home, you will need to have a substantial down payment, typically 5 to 20 percent of the home’s value. The American Bankers Association suggests the following tips to help save for it:

Develop a budget & timeline

Start by determining how much you’ll need for a down payment. Create a budget and calculate how much you can realistically save each month – that will help you gauge when you’ll be ready to transition from renter to homeowner.

Establish a separate savings account

Set up a separate savings account exclusively for your down payment and make your monthly contributions automatic. By keeping this money separate, you’ll be less likely to tap into it when you’re tight on cash.

Shop around to reduce major monthly expenses

It’s a good idea to check rates for your car insurance, renter’s insurance, health insurance, cable, Internet or cell phone plan. There may be deals or promotions available that allow you to save hundreds of dollars by adjusting your contracts.

Monitor your spending

With online banking, keeping an eye on your spending is easier than ever. Track where most of your discretionary income is going. Identify areas where you could cut back (e.g. nice meals out, vacations, etc.) and instead put that money into savings.

Look into state and local home-buying programs

Many states, counties and local governments operate programs for first-time homebuyers. Some programs offer housing discounts, while others provide down payment loans or grants.

Celebrate savings milestones

Saving enough for a down payment can be daunting. To avoid getting discouraged, break it up into smaller goals and reward yourself when you reach each one. If you need to save $30,000 total, consider treating yourself to a nice meal every $5,000 saved. This will help you stay motivated throughout the process.

Bidding wars are the new normal for buying a home today. In desirable areas, there may be multiple offers, which might force you to up the ante in a dizzying quest to come out on top.

Yet in the heat of the moment, many buyers run the risk of becoming overzealous, making mistakes that cost them the deal—or worse, land them with a house they regret. Don’t be one of them!

Here are some common bidding war mistakes you might be particularly tempted to make in today’s crazy market, along with some smarter, saner alternatives to try.

1. Bidding every last penny you have

“The market in Seattle is so competitive these days that houses go for tens of thousands of dollars above the list price,” says Lily Lei, an agent with RSVP Real Estate, Powered by ERA, in Seattle. “I’ve had buyers who want to bid all the money in their budget in order to win a bidding war, and I counsel them away from it.”

Why?

“The house may require tens of thousands of dollars worth of repairs immediately, like a new roof or new plumbing,” Lei continues. “They would have no money left to cover these essential repairs.”

In a heated market, “the appraisal may come in low,” she says. This means the bank’s appraisal says the home is worth less than what you’ve agreed to pay for it.

“Then you’d need a higher down payment to make up the difference,” Lei explains.

What to do instead: “Unless my clients have families who can give them the extra funds, I advise them to hold back 10% to 40% beyond what they can actually afford,” says Lei. “If it’s a young couple who are out on their own, for example, and they have no other financial resources, I tell them, ‘Maybe this is just not the house for you. There will be others.’”

2. Bidding with many contingencies

“You should never get involved in a bidding war before your financing is in place and you know exactly where your money is coming from,” says Glenn Raynes, a Las Vegas real estate investor who has been involved in numerous bidding wars and won most of them.

He especially advises against having your offer be contingent upon the sale of your current house.

“The seller will always pick the bid with the fewest uncertainties,” says Raynes. He recalls that he once won a bidding war on a Huntington Beach home with the third-highest offer it received. The reason? He was an all-cash buyer, which meant a quick and seamless closing.

What to do instead: Most of us aren’t in a position to offer cash, but we can get pre-approved by a lender before we go into the bidding war. We can also make sure the sale of our current house doesn’t enter into the deal. You could sell and then rent prior to bidding on a new house—or possibly sell and request a lease-back agreement from the new owner.

“It’s seldom all about price,” says Raynes. “Find out what else is important to the seller and try to accommodate that better than anyone else.”

3. Bidding with no contingencies

Jared Blank and Kacey Bingham, managing partners of The Agency in Denver, have seen buyers get so excited while bidding that they release all contingencies. That includes waiving the right to a home inspection and the ability to back out of the deal if an inspection reveals major flaws.

What to do instead: “If buyers want to be competitive in this market, they need to compromise on a lot of things,” says Blank. But the inspection is not one of them. If you win the bid on a house that’s crumbling and you can’t back out, it’s no win at all.

Instead, bid as high as you can comfortably afford, and make compromises on things like the length of escrow and down payment. But never, ever sacrifice the right to inspection as a negotiation point.

4. Assuming you’ll get a second chance

“Here in the Chicagoland area, bidding wars just won’t quit,” notes Janice Corley, founder and CEO of Re/Max Collection Premier by Janice Corley, a Chicago-based real estate brokerage. “Very often, we see hopeful buyers lose out on their second chance.”

Prospective buyers think they’ll have more chances to raise their bid if needed, and they are often wrong about that, Corley explains.

What to do instead: “If you find yourself in a multiple-bid situation, I recommend writing your bid as if you will not have a second chance to negotiate,” Corley advises. Consider it one and done!

5. Using the term ‘best and final offer’

You see people using this term on real estate reality TV shows. (Translation: “Negotiation is done, and I’m not offering you one penny or concession more.”) But what works on TV doesn’t always work in real life.

In a bidding war, negotiations are never over until the seller is ready to throw in the towel.

“Never use the term ‘best and final’ because it usually isn’t the case,” according to Todd Miller at The Agency New Canaan, CT. “Once you use this term, the listing broker will not take you seriously if you actually counteroffer again.”

“There are other important negotiable things that the seller will probably take into consideration,” adds Cliff Smith, also at The Agency in New Canaan. “These include the closing date, a larger down payment, or potentially removing a contingency, etc. If the seller sees the term ‘best and final,’ they may not come back to your bid to see about altering any terms other than price to make the deal work. Instead, they may choose another offer.”

What to do instead: Even if you’ve bid as much as you can possibly afford, never tell the sellers that. They might take you at your word and cut you from the herd. There might be other contingencies you might be able to handle, like a few months of leasing the property back to the seller at a reasonable price. Sometimes sellers aren’t ready to move yet.

6. Using an escalation clause

An escalation clause automatically increases your purchase offer by a certain amount above all competing offers. This continues until the price reaches the maximum price you’ve determined you’re willing to pay for the home. In other words, you bid $500,000 on a house and write an escalation clause that tops the highest bid by $5,000, until the price reaches $550,000.

“Our agents are not big fans of escalation clauses,” says Don Mastroianni of The Agency North Shore Long Island.

This clause puts the bidding beyond your or your agent’s control. Also, it doesn’t take into consideration valuable contingencies beyond price that you or other bidders might be willing to add.

What to do instead: “We recommend clients give a very strong offer right from the start to be able to stand out from the competition,” says Mastroianni.

Make a strong entrance with a high bid, and you’ll never be forgotten.

7. Not knowing a home’s true value

Some buyers are hesitant to offer above the asking price in a bidding war, thinking that the home is not worth more than that. What they don’t realize is that sellers often intentionally price their home slightly below its true value to get a bidding war going and have potential buyers drive the price much higher in the heat of competition.

Meredith Schlosser of Berkshire Hathaway HomeServices, Brentwood, CA, notes that buyers are less likely to win a bidding war if they “won’t step up to their highest price. Instead, they choose to believe the property is worth less.” As a result, they lose the house.

What to do instead: Refer to “numbers and proven stats that take into consideration the lack of inventory, market trends, how much the price of properties have increased in certain areas over time,” suggests Schlosser. “This will give you a better understanding of what the property is worth.”

Source: Realtor.com, Lisa Johnson Mandell

A favorite pastime of many buyers scrolling through real estate listings—or walking through an open house—is fantasizing about what life could be like in that home.

You might spot a swanky “Mad Men”–style bar that would be perfect for book club nights. Or maybe you’ll begin planning the feasts you could whip up with that six-burner stove! And what about the garden’s burbling fountain? Ah, that sound would be perfect for falling asleep to every night.

But here’s the thing every buyer should know: When it comes to house hunting, what you see isn’t necessarily what you get. Indeed a seller can rightfully haul off some items you may think automatically come with a house you purchase. So here’s a helpful reality check before your imagination runs too wild. (Bonus: We share tips to keeping some of those fixtures you absolutely love.)

What’s included in a home sale?

Precisely what comes with a home is not cut and dried, and each state has its own set of guidelines regarding this issue. But there are some guiding principles.

“If an item is attached, it is considered a fixture and by default should stay with the house,” says Dj Olhausen, an agent with Realty ONE Group in San Diego. “On the other hand, if an item is not attached, it may very well leave with the seller.”

If that still seems vague, “fixture” is a real estate term used to describe items that are physically attached to the house via nails, screws, bolts, glue, cement, or electrical wiring. Standard fixtures inside the home include ceiling fans, blinds, plumbing and heating elements, and built-in appliances. Outside the four walls, items that generally stay put include mailboxes, shutters, backyard office sheds, and in-ground landscaping.

Attachment issues

You might assume a refrigerator that looks built-in stays with the house or that the sellers will take their kid’s swingset with them. That’s where the acronym MARIA can help you identify fixtures:

Just keep in mind there are some common-sense exceptions to the definition of “attached to the property.” For example, let’s say the owners have a dresser that’s bolted to the wall to prevent it from toppling over on a toddler, or they have bookcases attached with earthquake straps to keep them from tipping over. In those cases, the actual furniture isn’t considered a fixture.

What about outside the home?

“In general, any object attached to the ground is considered a fixture, while anything that can be moved freely will be deemed personal property,” says Olhausen.

Still, when you are touring a home, it may not be apparent if something is attached or not.

“So when it comes to deciding if an outdoor item is viewed as a fixture or someone’s property, ask yourself if it can easily be removed without the use of tools,” says Olhausen.

For example, electric vehicles typically require hardwiring and electrical system upgrades for a charging station.

“I have found that some sellers are taking the connector [a portable, plug-in charger], but the electrical setup stays with the property,” says Wendy Gladson, a real estate consultant at Compass in Marina del Ray, CA.

Personal property that will definitely leave on moving day includes items like potted plants, sheds that lay freely on the ground, or any item that can be moved without being disassembled, according to Olhausen.

Everything is negotiable

You may really want that coat and shoe organization unit that fits perfectly in the entry hall or maybe that beer fridge in the man cave. So remember, there is wiggle room when it comes to what stays and what goes in a home sale.

However, the local housing market may dictate how far you get when you try to negotiate. In a cooler market, buyers have more leverage when asking for items. But you might not get the extras you want in a hot seller’s market.

If you’re still confused, don’t worry—you’re not on your own trying to figure out what stays or goes. Your buyer’s agent will know what fixture exclusions are explicitly stated in the multiple listing service, and will also help you negotiate for items you want.

“Just do not assume anything,” says Suzi Dailey an agent with Realty ONE Luxe, in Laguna Niguel, CA. “If you want something, it should be written into the contract.”

Source: Realtor.com, Lisa Marie Conklin

The prices of goods used in residential construction ex-energy climbed 3.6% in January (not seasonally adjusted), according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics. The index was led higher by a 25.4% jump in softwood lumber prices and 9.0% price increases for indoor and outdoor paint.

Building materials prices increased 20.3%, year-over-year, and have risen 28.7% since January 2020. Over the past four months, the index has climbed 8.4%.

The price index of services inputs to residential construction increased 2.9% in January following a 1.3% increase in December 2021. The index declined 13.5% between June and November last year but has increased 4.1% in the two months since.  The index is 8.9% higher than it was a year prior and 24.1% higher than the January 2020 reading.

Softwood Lumber

The PPI for softwood lumber (seasonally adjusted) increased 25.4% in January following 21.3% increase the month prior.  Since reaching its most recent trough in September 2021, prices have increased 73.9%.  According to Random Lengths data, the “mill price” of framing lumber has more than tripled since late August.

The PPI of most durable goods for a given month is largely based on prices paid for goods shipped, not ordered, in the survey month. This can result in lags relative to cash market prices and is why last month’s post indicated that “another sizable increase in the softwood lumber producer price index may be in the [January 2022] PPI report.”

Paint

The PPIs for both exterior as well as interior architectural coatings (i.e., paint) increased 9.0% in January. Year-over-year, the prices of exterior and interior paint have climbed 30.3% and 21.2%, respectively. Prior to 2021, the record 12-month price increase for exterior paint was 8.5% while that for interior paint was 10.1%–each of which was set in March 2019.

Steel Products

Steel mill products prices declined 1.9% in January, the first decrease in nearly a year and a half. Monthly increases in the PPI for steel mill products slowed in each of the five months preceding January 2022.

Even after the decline, however, prices have more than doubled over the past 12 months.

Ready-Mix Concrete

The PPI for ready-mix concrete (RMC) gained 1.4% in January after increasing 0.6% in December.  The index for RMC increased has been relatively volatile since mid-2020 and has climbed 9.1%, year-over-year (YoY). Prior to January 2021, year-over-year price increases had not exceeded 8.0% since December 2006.

Prices have risen an average of 0.6% per month since January 2021—double the 20-year average but lower than the housing boom average (+0.8%).

At the regional level, prices increased in the Northeast (0.4%), Midwest (0.9%), South (1.7%) and West (4.4%).  While RMC prices showed modest increases (year-over-year) in January 2021, the 12-month increases were significantly larger in January 2022 in each region except the Northeast.

 Gypsum Products

In January, the PPI for gypsum products climbed 3.4%–the 11th consecutive monthly increase.  Gypsum prices have decreased just once since August 2020 and have risen 31.4% since then.

Gypsum products prices have gained 23.0%, year-over-year, the largest increase since data became available in 2012 and more than quadruple the 10-year average.

Other Building Materials

The chart below shows the changes in other price indices relevant to the residential construction industry since January 2020.

Source: NAHB, David Logan

Zillow, the digital real estate company, said on Tuesday that it’s exiting Offers, its business that buys and flips homes, and eliminating 25% of its workforce.

The announcement was attached to Zillow’s third-quarter earnings report. The company’s revenue and earnings missed analysts’ estimates.

“We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated,” Zillow CEO Rich Barton said in the release. “Continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility.”

The stock dropped about 7.5% in extended trading following a 10% plunge during regular market hours. The shares are now down about 10% for the year as of Tuesday’s close.

Here are the key numbers from earnings:

Revenue in Zillow’s Offers business, which competes with Opendoor, climbed to $1.17 billion in the quarter. That’s way up from $186 million a year earlier, which was in the middle of the pandemic and in a dry period for transactions. However, the homes segment, which is mostly Offers, lost $422 million in the quarter, producing an overall net loss at the company.

Shares of Opendoor rose 7% in extended trading. The stock plunged alongside Zillow earlier in the day, dropping 15% at the close.

Zillow launched Offers in December 2019, starting with Southern California markets. The iBuying, or instant buying, product allowed homeowners to sell their home to Zillow for cash, eliminating a lengthy bidding, sales and closing process. They also didn’t have to worry about costly repairs before putting their house on the market.

“After closing on a home, Zillow will take care of necessary repairs, working with local contractors to complete projects like a fresh coat of paint, servicing HVAC units and other work a typical homeowner would do to get their home ready for sale,” Zillow said in a press release at the time.

But the home-flipping market proved to be a drag for a company that had built its brand on listing homes across the country and helping buyers and sellers connect through a marketplace. Prior to shuttering the business, the company said on Monday that it would stop buying houses through the end of the year, citing tight labor and supply markets.

“We’re operating within a labor- and supply-constrained economy inside a competitive real estate market, especially in the construction, renovation and closing spaces,” said Jeremy Wacksman, Zillow’s operating chief, in a statement this week. “We have not been exempt from these market and capacity issues and we now have an operational backlog for renovations and closings.”

Barton told CNBC’s “Closing Bell” after the report that Zillow’s ultimate failure was its inability to predict housing prices accurately. At the start of the Covid-19 pandemic, the market dried up. It then bounced back dramatically, and prices in many markets have climbed to record levels.

For the home-flipping business to be profitable, a company has to be able to sell a home for more than the purchase price and have enough margin remaining to cover all the other costs, such as maintenance and sales and marketing expenses. Barton said the company realized that it’s not in a position to accurately predict where home prices will be in six months “within a narrow margin of error.”

Additionally, Barton said the Offers product reaches only a small sliver of the company’s overall audience, which is effectively the entire market of homebuyers and sellers across the country.

Zillow’s internet, media and technology business grew revenue 16% in the quarter to $480 million, with gross profit of just over $130 million.

“We just determined that being an iBuyer was too risky, too volatile and ultimately addressed too few customers,” Barton said. He added that, in closing the business, “the logic is clear, the emotion is difficult” because of the layoffs.

Bloomberg reported on Monday that Zillow was looking to sell 7,000 homes for $2.8 billion to institutional investors, as it looked to unload its portfolio of properties. Some of those sales would be for below the purchase price, Bloomberg said.

Barton didn’t confirm or deny the numbers in the Bloomberg report. He told CNBC that the company has always sold to those types of buyers since entering the market, and he acknowledged that Zillow does have properties that it needs to sell. The company bought 3,805 houses in the second quarter and sold 2,086 in that period.

“We’re not in any kind of fire sale,” he said. “We’ll wind down the inventory in an orderly way.”

SOURCE: Ari Levy, CNBC

A record number of home builders are reporting a shortage of workers such as carpenters, painters, and electricians, the National Association of Home Builders reports. The shortages come at a time when demand is increasing for new homes. Builders are struggling to meet demand and faced with both surging prices for materials and shortages of lots.

The share of builders reporting a shortage of labor reached a record high of 76% in October, well above the previous peak of 67% that was set at the end of the 1990s, the NAHB reports. The latest percentage is also much higher than the 45% reached during the housing boom in the mid-2000s when the industry needed to find enough labor to build 2 million homes a year to meet demand, the NAHB reports.

More than 55% of single-family builders reported a shortage for each of 16 trades crucial in building a home. More than 80% of builders reported a shortage of labor for carpenters (rough, finished, and framing crews), the survey shows.

At a time when home improvement demand is surging, remodelers also are reporting extreme labor shortages. More than 55% of remodelers reported a shortage in all the same 16 trades.

A bar chart showing the percentage of various professions of builders and remodelers reporting labor shortages.

Source: Realtor Magazine

Older buyers seeking smaller or easier-to-maintain homes are crashing into younger buyers in a housing market where the competition is fierce.

Soaring home prices and new construction favoring bigger builds have interrupted traditional patterns of homeownership for buyers across the country. Smaller houses, desired by aging seniors and young couples alike, are among the toughest to find. The supply of homes up to 1,400 square feet is near a five-decade low, according to data from Freddie Mac.

In 2020, about 28% of real-estate transactions could be characterized as downsizing, said Lawrence Yun, chief economist at the National Association of Realtors. The majority of these transactions are made by buyers 55 or older.

“We have a housing shortage,” Mr. Yun said. “Clearly from the age patterns, young people want to upsize, and the older generation is looking to downsize, but not greatly—only 100 or 200 square feet smaller than where they’d been living.”

The typical housing cycle for many families—kids go off to school, household sizes shrink, empty-nesters hand off their family homes to new households raising their own children—has been disrupted in recent years, said Len Kiefer, deputy chief economist at the mortgage giant Freddie Mac. The large baby boomer population outnumbers the rising Gen X-ers, who would be the ones to traditionally take over the family homes.

Many boomers want to “age in place,” meaning living in their original home independently into their later years. A 2018 survey of 2,287 adults from the AARP shows seniors would prefer to stay in the communities where they already live.

“They like their grocery store, they like their doctor, they like their local options,” said Karan Kaul, senior research associate at the Urban Institute.

Once they decide to move to a smaller home, they end up competing with first-time buyers and limited supply, Mr. Kiefer said. Price growth has been strongest for smaller, less-expensive homes. “That works against you in terms of what you can get for your buck,” Mr. Kiefer said.

If they haven’t paid off their mortgage, older buyers might find they could sell their current home at a high price but then pay more in mortgage payments on a smaller place. The share of older homeowners with debt has steadily increased over the past decade, rising to 55.4% in 2019 from 33.2% in 2007. This rise is driven in large part by mortgage debt, according to data from the Urban Institute.

After retiring from working at the New York Department of Education for 33 years, Enid Maldonado-Salgado started to make a plan to move from her current home in Flushing, in New York City’s Queens borough, to further east on Long Island, where she and her husband can be closer to family.

The 60-year-old worked with a Realtor for a year before retirement. Ms. Maldonado-Salgado said her goal was to find a home valued at 80% of her current home’s worth. She found the house-hunting process difficult, even with the money she had saved from refinancing her existing home and the substantial profit she expects from selling it.

For Ms. Maldonado-Salgado, downsizing meant finding an affordable home that wouldn’t require too much maintenance or upkeep. She wanted the freedom to travel and to be closer to her grandchildren.

Ms. Maldonado-Salgado is now in the process of closing on a new house in Smithtown. The new house is nearly equal in square footage to her house in Queens.

“It wasn’t about finding something smaller, it was about finding something that benefited my budget,” she said. “We wanted to make things simpler for ourselves.”

Source: Realtor News, Julia Carpenter

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