If you look at when people buy houses, the first purchase is usually sometime in the late 20’s.  That’s when their first stable job kicks in and they are able to save up enough money, if careful, to buy their first home.  With what we’ve seen in the market since about 2007 though, that first “starter home” has become harder for many to attain due to high home prices and somewhat stagnant wages.

After the starter home, you often will see a move after children are born.  This move in St. Louis will usually be heavily dependent on school districts and square footage.  It’s during this search, the second one, as a buyer’s agent in St. Louis when I see something peculiar happen during house hunting.

As we look at houses for the first time, many potential new home buyers notice that the house they are leaving seems to be nicer than the homes that they are leaving, dollar for dollar.  Why is that, they wonder?

I don’t have the answer, but I have a few guesses.

  1. Over improvement of the starter home. Sometimes, a first time homebuyer will be so excited about owning their home they will make improvements that aren’t in line with the neighborhood. We call this over improvement.  As an example, a buyer can add granite countertops to a very small area when everything in the neighborhood is still Formica.  This leads me to a second point.
  2. The cost to improve a smaller home is less than a larger home. In our original example, they homeowner was moving from Formica to granite.  They could afford this because their kitchen might be half the size of the home they are trying to move to.  The more space you have to fill, the more expensive it will be to install.  Let’s say that granite countertops for a 10 foot section go for 70.00 a linear foot.  You get $700.00 to do all of your countertops in a small kitchen.  If you just double the counter space in a larger home, the cost to do the countertops is $1,400.  This doubling effect is evident in the cabinets as well.
  3. Previous Home buying cycles. It seems like homeowners in general are happy to spend money on their home if they aren’t going to be underwater on their home.  As an example, assume you bought your house in 1999 and you saw home prices increase year over year.  If you bought your home for 150, and it’s now worth 200,000, you don’t feel bad putting in a new kitchen.  Then, let’s look at those folks who may have purchased in 2008.  They bought a house for 200,000 that is now worth 150,000….do you think they are going to be putting any money into the home?  Not likely.

Taking Peculiar Into Consideration

Home buyers aren’t wrong to question whether or not it makes sense to stay in their current home after seeing what is available for sale.  This is something peculiar that happens during house hunting.  They will often ask me why they are even bothering to look at homes that don’t appear to be better design wise than what they are currently living in.  This is where our philosophy at Deerwood Realty comes into play, where you do have an advantage.  We believe you should choose a home to live in based on the idea that you are going to live there forever.  This means that if the home values go up in an area, you are happy to live there, and if the home values go down, you are happy too.  If you keep this in mind, it should help in the home search because you aren’t adding an unnatural fortune telling aspect to your decision.  We don’t really have an accurate weather forecast for 6 days, why do we fool ourselves into believing a home purchase would be any different?