Why Moving Up In A Down Market Makes Sense
This is traditionally the start of the busiest period in the year in real estate sales activity, driven to a large extent by the need for families with children to get them enrolled in new schools in time for the new school year. For those who are buying or selling due to a job change, or any other case of necessity, the question does not arise but for discretionary buyers or sellers, it is an important consideration. My response may give you some food for thought.The answer to the above question depends on your personal circumstances. If you are buying up, this is probably the best time imaginable to move house. Here’s why:
Let’s suppose you have a home that was worth $800,000 2 years ago. A move up then to a $1.2m home would have cost you an additional $400,000.
If we assume that home prices have fallen 20% in the last 2 years, your $800,000 home is now only worth $640,000. Fortunately for you, that $1.2m home has also dropped in value - to $960,000. So moving up to that same home would cost you only $320,000, saving you $80,000 in extra mortgage costs. Yes it’s true that you have to sell your home for 20% less than you could possibly have sold it for 2 years ago but so what? Those times are gone. You can still move up to the same home you could have then, only now it will cost you less money. Moving up in a down market is a great thing to do.
If you are currently renting, or perhaps a first-time buyer, it could also make a lot of sense to buy now, rather than wait until later.
There is no doubt that there are many potential buyers who are currently sitting on the fence and “waiting for the market to bottom out” in the belief that this is what serves their best interests, but in reality, this is probably not such a great idea.
First of all, how do you know when the market has bottomed out? The answer is, only after we have passed it and prices are on the rise. Most of the economists feel that we either at, or very near to, the bottom any way.
Also bear in mind that interest rates are now amazingly low. The only way they are going from here is up. And let’s face it, the most important number you should be looking at is your monthly mortgage payment. That is a lot more relevant than the price you pay for your home.
If you buy in today’s market, you have the benefit that there are a large number of homes from which to choose, including some bargain priced bank-owned ones. And sellers, in general are very motivated. If you buy after the bottom, when house prices are on the rise, you face increased competition and the possibility of multiple offers.
There is a further tangible benefit you may want to consider regardless of your circumstances. Suppose you wait until prices are rising again, maybe another 4-6 months. Moving house is not generally just an investment like buying stocks and shares. By buying now, you actually get to live in your new home faster and enjoy it. Life is not just about saving every dollar you can. Time is the one commodity you can never have more of!