Expand Your Horizons
You've been searching for a long time for your new home, without success. Maybe you're looking in the wrong place.
According to the Census Bureau's 2017 American Housing Survey (AHS), 35% of people who had recently moved did so because they wanted a larger or higher-quality home – and that dream home may require moving to a different area. The AHS found that another 18% relocated to reduce their housing costs. Apparently, an affordable home that met their needs (or wants) wasn't available in their immediate area.
Relocation can mean anything from moving across town to moving across the country. How far are you willing to move away from your current home to find a different one? You may not be able to make a long-distance move. Jobs, family responsibilities, or schools may keep you nearby – or maybe you really like your current area and don't want to move far away.
A recent NerdWallet study shows varied home migration habits across America, with people preferring to stay in their existing area but a sizable number making a larger leap to a new area.
America's Migration Patterns
Data from NerdWallet's Migration and Housing Affordability Analysis shows that from 2012 to 2016, an average 47 million residents moved each year – but the majority of those moves were within the same metropolitan area.
For example, the Boston metro area averaged 442,318 movers within the area annually from 2012 to 2016. During the same period, Boston averaged 189,432 newcomers annually and 144,215 residents moving out annually.
New York City and Chicago both lost more residents to migration than they gained, but all the other metro areas studied had a net increase in new residents just from migration – potentially disrupting local housing markets.
Unless home availability keeps up with the influx of new homebuyers in any individual market, prices will rise – and price gains are forcing potential homebuyers to rent in some of these markets.
NerdWallet's analysis found that most people moving to a new metro area are renters – averaging 68% across all markets. San Diego had the lowest percentage of newcomer homebuyers at 23%, while Phoenix and Tampa tied for the highest percentage (41%).
Affordability depends on how much income you can devote to housing. The survey found that in every metro area analyzed, the median homeowner income was more than double that of the median renter income. In most areas, homeowners spent between 18% and 22% of their income on housing, but renters spent between 30% and 33%– making it even more difficult for renters to save and join the housing market in the future.
Plenty of homeowners are living on the edge as well. In fifteen of the surveyed metro areas, homeowners paid at least $500 more a month on average housing costs than renters.
Assess Needs and Get Finances Ready
A successful relocation requires planning and preparation – and not just with finances. You may know what you're looking for in a home, but do you know what you will accept?
Consider today's deal-breakers, but also think about the future. If you have children (or more children), is the space adequate? If you're getting older, will the house accommodate limited mobility as you age? Will your favorite features now still be your favorites in twenty years?
Objectively assess what you're looking for in a home and rank the attributes in order. You're more likely to resist an impulse buy or stretching beyond your means to get a particular home.
Meanwhile, lay the financial groundwork for your move. Adjust your current budget to allow down payment savings and settle on a future budget that includes your mortgage payment and other housing costs such as taxes and maintenance. Be realistic on how much you can afford to pay for your new home.
Does your credit score warrant a good mortgage rate offer? Check your credit report for errors or any signs of abuse (fraudulent charges or accounts) that could be dragging down your score and consider a credit monitoring service for extra protection. Let MoneyTips protect your credit and your identity with a free trial. Review your report to see what's keeping your score down, such as missed payments or using too much of your available credit.
Finally, study the housing markets in your destination for availability and price. If you don't like what you see, can you expand your search area, or is renting a better option?
Whatever your reason for moving, you're likely to have a better result if you plan ahead. Be open-minded about possible options in your destination housing market but be cold-bloodedly objective with respect to finances. Don't be tempted to buy more home than you can afford – and if renting is a more viable option than homeownership, don't convince yourself otherwise. There's nothing wrong with renting and making a plan for a future home sale.
If it's an option, consider moving further away from your desired metro area and balance out home prices with annual commuting costs.
If you already have a home and are simply looking for an upgrade within the same market, compare the advantages of an upgrade with the potential to fix up your existing home and increase its value. Maybe you're already living in your best choice and just haven't realized it yet.
MoneyTips is happy to help you get free mortgage and refinance quotes from top lenders.