Now is the time to be a “Move-up” home buyer. . .
“I really need more room, our house is bursting at the seams, but the market is so bad, we just can’t afford to sell right now”.
I hear this statement too often these days. So many people I talk to are scared to death of the current real estate market – like deer caught in the headlight – they just are frozen and can’t decide what to do. They figure since the market is down, now is definitely not the time to be selling their current home and trying to buy a bigger home, even though they may desperately need the room, either because of a growing family, or other reasons.
Let me give a simple example of why this fear is keeping you from the truth. Example Home Buyers – Steve & Kristin – bought their first home back in 2003 for the average price of a Chester County Home, which then was about $325,000. They put 5% down and took a loan of about $308,000. Today their home would be worth about $360,000 to $370,000, which is still pretty good. Yea, it’s not $399,000 that it was a couple years ago, but that’s still pretty good appreciation. Plus they probably have been paying their balance down.
Let’s assume that they even took a home equity loan of $20,000 3 years ago to put in a new kitchen. So that makes a max of $320,000 that they may owe on the home. With the average cost of 7% to sell real estate in the area, they would still walk away from the sale with approximately $25,000. That’s a good chunk of change to put down on your next home.
Now, if the value of real estate in Chester County is down about 10% -15%, that same percentage is worth more money on a $500,000 home than a $300,000. So, while they may “lose” $10,000 by selling now, they save $20,000 on the purchase, for a net savings of $10,000. If you reverse the example, it doesn’t work in their favor. If home sales improve 10%, Steve and Kristin might sell for $400k, but now their dream home is worth $550,000, which would cost them an extra $20,000, instead of saving $10,000.
I believe the illustration below says it all.
If you are considering selling your current home and/or buying, feel free to contact me, Chris LaGarde, for a pressure free consultation. I would love to help bring clarity to your real estate decisions.
