HomeMarket NewsSmall CapsProfiting from Surging Property Values: How Downsizing Homeowners are Hitting the Jackpot

Profiting from Surging Property Values: How Downsizing Homeowners are Hitting the Jackpot

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Amid the unprecedented surge in the U.S. housing market, homeowners looking to downsize are experiencing unexpected financial gains. The remarkable appreciation in property values has positioned many individuals in a favorable spot, particularly those considering a smaller living space. According to Skylar Olsen, chief economist at Zillow Group Inc (ZG), the recent housing market surge can be likened to homeowners β€œwinning the lottery.”

Since January 2020, the market’s value has soared, resulting in a windfall for homeowners. The U.S. housing sector has seen its total valuation skyrocket by nearly 50%, reaching an astonishing $52 trillion. California alone accounts for almost a fifth of this valuation, with other states like Florida, New York, Texas, and New Jersey also experiencing significant gains.

The Upside of Downsizing

One of the key benefits of the surge in property values is the opportunity for homeowners to sell their properties at a premium and purchase smaller homes without taking on additional debt. Many fortunate sellers are able to buy their next home in full, completely avoiding mortgages. According to 2021 data from the U.S. Census Bureau, nearly 78% of homeowners aged 55 and above have fully paid off their homes.

The boomer generation, aged 58 to 76, has been particularly active in both selling and buying homes. Their representation in home sales increased from 42% in 2021 to 52% in 2022. This increased demand, coupled with rising prices, has made it more challenging for millennials to enter the housing market.

The Real Estate Landscape

Companies like Redfin Corp. (RDFN) and Zillow Group, Inc. have played a prominent role in the real estate market, offering innovative solutions and platforms for buyers and sellers. Meanwhile, Anywhere Real Estate Inc. (HOUS) and RE/MAX Holdings, Inc. (RMAX) have leveraged their extensive networks and established brand names to maintain a significant market share.

For investors looking to gain exposure to the real estate sector, there are ETFs such as iShares U.S. Real Estate ETF (IYR) and Real Estate Select Sector SPDR Fund (XLRE). These ETFs provide diversified exposure to the industry, capturing the performance of both traditional and tech-driven real estate companies.

Conclusion

Amid the rising property values in the U.S. housing market, homeowners looking to downsize are finding themselves in an advantageous position. The opportunity to sell at a premium and purchase smaller homes without accumulating additional debt has been a game-changer. As the real estate landscape continues to evolve, companies like Redfin, Zillow, Anywhere Real Estate, and RE/MAX Holdings are at the forefront, offering innovative solutions to meet the changing needs of buyers and sellers. Investors seeking exposure to the real estate sector have the option to explore ETFs such as iShares U.S. Real Estate ETF and Real Estate Select Sector SPDR Fund. With the surge in property values, downsizing homeowners are reaping the benefits and hitting the jackpot in today’s thriving housing market.

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo: Shutterstock

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