Dive Brief:

• Moving from a two-bedroom home to a three-bedroom home can cost owners around $450 extra per month in mortgage payments, with the figure considerably higher in popular coastal markets, according to Zillow's latest Cost of Moving Up Analysis.

• Owners who trade up in the Midwest, particularly in Chicago, Cincinnati and St. Louis, see the lowest premium increases, averaging $150 per month. In Cleveland, the move adds just $74 to monthly mortgage payments. Meanwhile, owners in San Francisco and San Jose stand to almost double their monthly payment.

• Additional bathrooms followed the same rule as bedrooms, according to Zillow, making renovations to add an extra bedroom or bathroom a value-add for existing-home owners seeking to benefit from today's seller's market.

Dive Insight:

The need for existing owners to trade up is growing as the market faces mounting pressure from high demand and insufficient inventory, particularly at the entry-level price point.

According to the latest quarterly Housing Opportunities and Market Experience survey from the National Association of Realtors, 69% of homeowners in 2017's first quarter said it was a good time to sell, while 80% reported that it was a good time to buy a property.​ 

This cycle stands to further hamstring the market as it pushes away potential buyers and, in particular, first-timers, who accounted for 35% of home sales in 2016, according to the NAR. Employment gains and slow-but-sure wage growth stand to further bolster demand for owned housing among this demographic.

The persistent labor shortage and the increasing cost of doing business for builders has also been a drag on creating new inventory. Still, industry observers have been optimistic about recovery, citing strong market fundamentals. The latest housing starts and new-home sales reports were positive and, along with an increase in construction employment, could underpin such confidence and indicate more new construction activity ahead.

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