First the facts: Mortgage rates are going up and compeition is increasing.
I wish I had a dollar for every time I've heard a potential buyer tell me how much they would love to take advantage of the low price on their DREAM HOME but they don't want to give their home away. They say that if they wait awhile, the price of their current home will come up and then they will make more on their house! This works well if you live in a bubble and the rest of the world will allow their house to increase value while the rest of property values remain at today's level. I understand the hope but get lost in the reality. If you look at the realities of today's market, homeowners that desire to move up should cease the moment. Here's why; assume you own a home that has lost 10% of its value and is now market priced at $150,000 dollars. If you sell that home and exit the housing market completely you will realize the 10%. Instead of selling you decide to stay put. Now let's assume that the real estate market begins to recover and the value of real estate averages a 4% increase in market value over the next 10 years. Your existing home would be worth $213,497 at the end of that period. A net gain of $63,497. You would have recouped almost all of your value lost during the market down turn. After 10 years you're back to even, way to go - I guess?Let's see how things might work if you decided to make the move and buy that more expensive home. You sell your current home, at today's lower market price, and move up to a home that is currently market priced at $250,000. As in the previous example, the market begins to recover over the same 10 year period at the same rate. The value of the more expensive home has now grown to $355,828. That would be a net gain of $105,828. You have now gained back the entire amount of value lost in your original home and gained an additional $41,000 in home value. Because the base value of the new home was higher the gain was more. You got to live in the dream house you wanted, you bought it at a lower price and you financed it a very low interest rate. The lower rate may have resulted in a monthly mortgage payment that was very close to your original home. You should be congratulated on your shrewd investment!!!
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