Today the market is not good, you want to move up, but will a little more time really change the financial picture? Recent forecasts say that we will not return to the 2005 peaks until 2015.... Do you really want to wait another 7 years to make a move????
As I mentioned in my last post when investing in the stock market, it is accepted as a basic truth that no one makes money by trying to "time" the stock market. The real estate market is similar to the stock market in that there is a general rising trend, with local markets going up and down like industry groups, and individual houses rising and falling like stocks. But with the exception of a few large investors the real estate cycles are too long and geographically spread out to be useful. If you are moving city to city the relative cycles are difficult if not impossible to predict. Even if you are looking to move to a nicer neighborhood in your own town, then the home you are looking to buy will lose value slower, and gain value quicker than the one you are trying to sell. If you wait until next year the one you want to buy will be even more expensive relative to your home than it is now.
Here's the math:
|
|
Weaker Neighborhood
|
Stronger Neighborhood
|
|
Price Difference
|
|
Start
|
|
$ 300,000
|
|
$ 500,000
|
|
$ 200,000
|
|
down market
|
-10%
|
$ 270,000
|
-6%
|
$ 470,000
|
|
$ 200,000
|
|
up market
|
5%
|
$ 283,500
|
7%
|
$ 502,900
|
|
$ 219,400
|
|
up market
|
6%
|
$ 300,510
|
8%
|
$ 543,132
|
|
$ 242,622
|
If you started in a weaker neighborhood back in 2005 and you lost 10% of your value. The stronger area only lost 6%. Now in a couple of years things start to rise again, but guess what, the stronger area gains faster, so by the time your house is back to where you started, the house you want is even more expensive. This says that you should figure out how to make the move sooner rather than later, because you will gain back more value in the stronger area in the same time. In this example if you are at the bottom, you've ‘lost' $30,000, if you wait through the two up market years until you get that back then you made $30,000. If you sold and bought in the stronger neighborhood then you would have made $72,000 in that same period of time!!! Even if the two areas come back at the same rate you are still ahead with the more expensive house, and more leverage!!
If you make your moves to quality, to better neighborhoods, or stronger towns then you will come out ahead in the long run, and you will get to live where you want while you gain equity.
;)
;)
