Wednesday, January 2, 2008

Why it's OK to Sell Your Home in a Down Market

As prices fall, many homeowners are deciding to stay in their homes until the market recovers. However, if you are planning to buy up (move up to a higher price range), it's really ok, and in fact may be a smart move, to move in this market.

Say what???

Although you may have taken a hit on your home price, higher priced homes have taken an even bigger hit on theirs, and you can buy your "move up home" for a lot less money. Say, for instance, prices have decreased 5% in your area. At the top of the boom, you're home was worth $200,000 and you were looking at homes in the $400,000 range. Your home is now worth $190,000, but that $400,000 is now priced at $380,000. You're already up $10,000!

Where you'll see the most financial gain, however, is long term and with market recovery. When the market DOES stabilize, and DOES start to recover, you'll see greater gains because you're at a higher price point. Taking a look at the examples above, and starting with a price of $190,000 and $380,000, even a modest appreciation of 1.5% a year over 5 years will yield $204,684 and $409,368, respectively.

Now, some fair warnings:

1. This is LONG TERM. I don't think anyone is expecting a quick recovery or hand over fist appreciation like we've seen in the past few years. Slow and steady wins the race on this deal.

2. This is assuming that the market doesn't continue to depreciate, and we don't have a complete bust in the market.

Ready to make the move? Should you buy or sell first?

I'll tackle that topic in my next blog posting. Stay tuned..

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