Wish You Could Trade In Your Home? Now You Can
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What housing and economic headlines set the stage for this episode?
Your Money Briefing. Money and market stories from The Wall Street Journal. I'm J.R. Whalen in New York. Ever wish you could trade in your house and upgrade? Well, now's your chance. We'll discuss in a moment. First, these money headlines. The Wall Street Journal's Daily Shot column points out that economists expect second quarter GDP growth to exceed 3% on an annualized basis. The New York Fed's now-cast model for the second quarter is at 3.2%, with the latest boost coming from regional manufacturing surveys. Also, capital investments and overall consumption have driven GDP growth over the past several years. But Google search data indicates that consumers are now less inclined to spend and that consumers are experiencing the highest level of stress since late 2008.
How does the new 'trade-in' home concept work and who introduced it?
The Commerce Department says that sales of newly built single-family homes fell 1.5 percent in April from a month earlier to a seasonally adjusted annual rate of $662,000. That comes in lower than the $679,000 expected by economists. And while sales were still well higher than a year earlier, the Wall Street Journal heard on the street team says that new home sales remain well below pre-financial crisis levels mostly due to the high cost of labor and materials. coupled with rising mortgage rates. Builders can't easily step up construction, framing labor costs have jumped 39% over a year ago, and labor availability has become a persistent concern. And Wall Street Journal reporter Sarah Cheney points out that the share of new delinquencies on student loans has fallen to the lowest level in more than a decade, and it's not just due to the healthy labor market.
Granted, April unemployment came in at 3.9%, which is its lowest point since late 2000, and economic growth picked up over the past year. But another factor is that more borrowers are using options to postpone payments or to reduce the amount they're required to pay each month. The first option, known as forbearance, allows borrowers to go months without making a payment while remaining in good standing on their debt. And the second option, called income-driven repayment, sets borrowers' monthly payments as a share of their income, typically 10% of discretionary income, as defined by a formula. This is your Money Briefing from The Wall Street Journal. Welcome back, everybody. It's easy enough to trade in your old phone for a new souped-up model or trade in your car.
But can you trade in your home? Turns out you can, and Wall Street Journal reporter Laura Casisto is here with details. So, Laura, this idea of trading in your home was introduced by a San Francisco startup. They're experimenting in a few U.S. cities, right?
Essentially, if you walk into a sales office at, say, a Lennar development and you want to buy a brand new home, but as with many people, you have to find some way to get rid of your existing one, they'll refer you to this startup called Opendoor. And Opendoor says they'll make you a cash offer within 24 hours, take that home off your hands, and you can live in it until your new home is ready.
It's almost like the advertisements we see for companies involved with loans, taking a loan off someone's shoulders.
Yeah. I mean, the idea is that a lot of people need the equity from their old home for the down payment. And so basically, you've got a ready-made down payment in that home if you can sell it. And so that's the pitch. Of course, it sounds a little too good to be true.
Well, you know, you spoke to some homeowners who were very skeptical about this process. They actually had a very good experience.
Yeah, I was skeptical of it as well. I mean, the difference between your home and your cell phone is your home is your biggest asset. I assume it's worth a lot more than your cell phone. That's right. And, of course, a home is a very emotional purchase. It's very subjective. And I wondered if they would be taking advantage of people. And Of course, I don't know what the full universe of people is, but I talked to some people who said that real estate agents warn them, well, they'll give you a really good offering price, but then they'll nickel and dime you on the inspection, and before you know it, you won't be getting nearly as much as you thought you would.
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