A sweet spot in the housing market for move-up homebuyers (© Ariel Skelley/Blend Images/Corbis)

© Ariel Skelley/Blend Images/Corbis

The peak home-selling season may have ended, but there some buyers are just getting started: those looking to sell a home and trade up. Is now a good time for these buyers to start their search? And what does this uptick in move-up buyers mean for the market?

In this installment of Buying Advice, we’ll also check in with the latest housing numbers and give move-up buyers a refresher course in listing terminology. (Bing: What is a short sale?)

Movin’ on up
Homeowners in many areas who bought just before the housing bust had little opportunity to move up to a larger home. Underwater on their mortgages, they were stuck for years waiting for their homes to appreciate.

The good news is that a significant number — 18.5 million homeowners, or 40% of all folks with a mortgage — now have at least 20% equity, according to real estate data firm RealtyTrac.

That’s because prices in the first seven months of this year increased faster than in any year since 2004, when the real estate bubble was inflating, according to the latest Case-Shiller Home Price Indices.

Now many once-stuck owners can jump back into the housing market and move up to a larger or better-located house.

While exact data on move-up buyers is hard to come by, the share of first-time buyers has been declining, dropping to 28% of purchases in August from 31% in August 2012, while at the same time sales have surged by double digits, according to the National Association of Realtors. Extrapolate from that, and it appears second-time-around buyers are becoming a bigger part of housing sales as home prices and interest rates have started to rise.

“For a move-up buyer, the price of the house they want is going up, but so is the house they own,” said Jed Kolko, Trulia.com’s chief economist.

Moreover, because these buyers have more money to put down and are less sensitive to interest-rate upticks, they can afford to wait until the right house comes along, Kolko said.

That’s what Kim Drusch of Century 21 Award in San Diego witnessed with one of her recent listings. While many homes at a lower price point were getting multiple offers, a home priced around $600,000 had plenty of interest at its open house, but no one eager to make an immediate bid.

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Some home shoppers may be waiting for more inventory. With the number of homes available for sale limited, there’s far less for move-up buyers to choose from. So, while selling their starter home may be easy, finding a place to move into is much less so.  

To be sure, a lot of high-end inventory was taken off the market in the first half of the year.

Sales of existing homes priced at more than $1 million surged 37% in the first half of 2013 — triple the growth of the housing market as a whole — according to real estate research firm DataQuick.

The return of move-up buyers is good for the market as a whole, Kolko said. It brings more homes to the market, particularly much-needed starter homes, as these buyers trade up.

It’s also a good sign for the broader economy, wrote Yanling Mayer, research director for mortgage-technology company FNC, in the company’s blog.

“An important sign of a healthy and sustainable recovery is increased housing turnover driven by trade-up buying, which is more or less discretionary spending,” Mayer said. “These buyers are typically more responsive to market conditions and financial incentives.”