IRVINE, Calif. – Oct. 31, 2013 – RealtyTrac released its Aging Homes Analysis, which shows that more than 70 percent of the U.S. single-family homes were built before 1990 – but only 60 percent of 2013 sales year-to-date were for homes built before 1990.
“The high percentage of homes that are at least 20 years old and likely in need of some major repairs is eye-opening,” says Jake Adger, chief economist at RealtyTrac. “However, given the low inventory of homes available for sale in today’s market, this challenge of aging U.S. housing supply can also be an opportunity for buyers looking for a bargain and homeowners looking to update their living space and improve the value of their homes.”
The likelihood of purchasing an older home varies by state. Homes older than 1990 made up more than 80 percent of year-to-date 2013 sales in 14 states: Louisiana, Vermont, Wisconsin, Michigan, New Mexico, Kentucky, New Jersey, New York, Rhode Island, Illinois, West Virginia, Connecticut, Massachusetts, and Pennsylvania. In contrast, older homes made up less than 40 percent of 2013 sales in Utah and Nevada.
Homes built in 1990 or later sold at an average price of $256,292 year-to-date in 2013 while homes built before 1990 sold at an average price of $233,221, according to RealtyTrac.
“The lower price point on older homes is not surprising given many are in need of some rehab and are more likely to have maintenance issues,” Adger says. “But this also presents an opportunity for buyers willing to take on that older inventory. Those buyers can purchase at lower price points and face less competition from institutional investors.”
Government-backed rehab financing
Adger believes the Federal Housing Administration’s 203(k) program is the government’s answer to the problem of the aging housing supply. Owner-occupant buyers can take advantage of the 203(k) program to finance the purchase, rehab and upgrade of an older home, while homeowners can also take advantage of the program to roll rehab costs into a refinance.
“Many consumers may not realize the FHA 203(k) program allows them to roll in the cost of both minor and major rehab into the purchase financing or a refinancing,” says Dennis Walsh, CEO of REBuildUSA, which connects buyers and homeowners with lenders specializing in 203(k) loans. “This means the entire layout of these older homes can be changed to fit more with modern tastes and sensibilities.”
A National Association of Home Builders’ 2007 report provides life expectancies for a number of household items based on the age of the home:
• As new as 10 years – washing machine, dishwasher, carpet and duct work
• 10 to 25 years – decks, asphalt roof, linoleum or laminate flooring, water heater, sprinklers, faucets and toilets, air conditioner, furnace, aluminum windows, paint, aluminum and steel gutters, other appliances
• 25 to 50 years – kitchen cabinets, wood roofs, wood windows, electric heating, trim lumber, kitchen cabinets
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