The Housing Market: It's A Game Of Snakes And Property Ladders

Today’s housing market is a disaster for those trying to move up the property ladder. House prices are shooting up like never before in cities all over the country, and God help you if you happen to live in San Francisco.

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The result? Today there are thousands of professionals working six days a week who can barely afford accommodation. Most are living in hovels that masquerade as professional apartments. They’re sharing mortgage costs, living on top of each other and generally having a horrible time.

It wasn’t always like this. In the past, a professional working a single job could afford to move up the property ladder without breaking a sweat. But over the past few decades, house prices have continued their inexorable rise. Now they’re so expensive in some cities that they’re utterly unaffordable.

So what’s driving all this? There are two problems here. The first is that cities are restricting the number of new homes being built. There’s opportunity for profit, but builders struggle to get permission for new builds from urban planners. The planning process itself is so involved that many builds that would be worth it just aren’t. The other problem is in the financial sector. Low interest rates are pushing down the price of loans. The original idea of this was to make it easier for people to get their own home. But it’s backfired. Low interest rates have made borrowing cheaper and meant that sellers can charge more for their homes.

The question for professionals, therefore, is how to move up the property ladder in today’s economy. Here’s some of the latest thinking on what to do. 

Move To A Cheaper Area

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There’s a vast difference in prices between the US’s most expensive cities, and it’s cheapest. House prices in Mobile Alabama are a third what they are in San Francisco. With the rise of mobile working and the gig economy, many young professionals are considering this course of action. They’re on the lookout for exciting, yet low-cost places to live that will help reduce their mortgage bills.

There’s a perception that living in a cheaper area means living somewhere that’s lower quality. But this just isn’t true. Not everywhere with low house prices is like Detroit. In southern states, income has been historically low. Here, facilities are good, and prices are still reasonable.

It’s also worth thinking about living in rural areas. Again, these areas don’t see such dramatic rises in price because location isn’t so important.

Overpay On Your Mortgage

There’s a reason why the word mortgage has a “mort” in it. Mortgage are with you for life, right up until you die. Well, that’s the conventional wisdom at least.

But with interest rates so low, many people are looking at saving in a very different way. Traditionally, people on the property ladder would pay their mortgages and save at the same time. Their savings would then go towards a deposit on their next house. But with interest rates on savings now so low, people are rethinking how they move up the property ladder. Now, many people are just opting to overpay on their mortgages. The interest savings they make here override any benefits they could get from putting their money in a savings account. Decreasing debt faster means that there’s less interest to pay and lower mortgage payments in the future. It’s win-win, or at least it is until interest rates go back up. 

As www.calmtg.com/types-of-loans/jumbo-loan/ explains, there are a number of different types of home loans. One such loan is the so-called jumbo loan. Often it can be hard to buy a home with a standard loan that conforms to loan limits established by regulation. You might want a home, but legal limits mean you can’t get hold of the money to do it.

Many people, however, have excellent credit scores so it seems unfair that they should be denied a loan to buy the home they want. If that’s you, jumbo loans might be the solution. Loan limits for these loans are $417,000 across most of the US, and up to $625,000 in places with higher home costs.

Be Patient

According to the data, the average first time home buyer spends more than five years in their first home. For many people, it’s a lot longer than that. Saving for a new home and moving up the property ladder takes a lot of time and patience. Deposits aren’t built overnight. They require commitment over many years.

Of course, there are things that you can do to speed up the process. The first is to go out and try to get a higher paying job or promotion. Don’t get attached to the people or the work that you do. Be ruthless and find new opportunities. The other things to do is to cut back on spending or put off having children. For many people looking to move up the property ladder, frivolous spending is their number one enemy.

Boost The Value Of Your Home

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Increasing the value of your home means that you can generate more equity when you come to sell. The more money your house is worth, the more you can put towards a new property. 

Sophisticated buyers take future house prices into consideration when they buy their first home. They ask themselves whether they expect the area to support higher home prices in the future. Things to look out for include new, burgeoning industries in the area, as well as desirability factors. Does the area have good schools, for instance? Just look at what’s happening right now in places like Boston, Massachusetts. Here, we see a boom in the robotics and science industries according to http://www.forbes.com/. These industries are growing rapidly right now, and in the future, we’ll see more jobs and higher demand for housing.

Moving up the property ladder can seem like a struggle at times. But you’ll be amazed at how quickly the time passes once you commit yourself to achieving your goals.