Economist's Commentary: August 15, 2008

Trading Up or Down?

By Jessica Lautz, Senior Research Analyst

Traditionally, home buyers upgrade from their recent home sale to their new home purchase. Americans often think of their first home purchase as their starter home - i.e., as an investment that they will upgrade to increased square footage and typically a higher priced home using the sale and equity gained on their last property to purchase up.

Another popular reason (the third most cited) for making a home purchase was the desire to purchase a larger home. The majority of recent home sellers who purchased a home, 53 percent, upgraded to a larger home. About one-quarter of sellers purchased a home that was the same size as their previous home and about one-fifth traded down to smaller home.

Price points do not always match with square footage. While half of sellers purchased a home that was larger, only 39 percent of recent sellers purchased a home that was more expensive than the selling price of the home they sold. Nineteen percent of home sellers purchased a home that was less expensive than the home they recently sold. The largest segment of recent home sellers purchased a home that was the same price as the home they sold, 42 percent.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

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