I have been approached my many people recently for advice on whether or not to wait for the market to "bottom out" before they buy their next house. These clients wonder if it would be more beneficial to move now or to wait for a better (different) market.
These questions can only be answered by looking at what each client is trying to do. For example, if you are moving up to a bigger and/or more expensive home, it may be in your best interest to sell your home and buy your new home while the market is adjusting downward.
In order to explain why this is, please see the following chart:
Value of Current Home | $300,000 |
| Value of Future Home | $500,000 |
Market Decline | 15% |
| Market Decline | 15% |
New Value of Home | $255,000 |
| New Value of Future Home | $425,000 |
Equity Loss | $45,000 |
| Savings | $75,000 |
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Savings - Equity Loss = $30,000 Net Gain! |
The opposite is true if you are downsizing to a less expensive home. The following chart will explain why:
Value of Current Home | $600,000 |
| Value of Future Home | $300,000 |
Market Decline | 15% |
| Market Decline | 15% |
New Value of Home | $510,000 |
| New Value of Future Home | $255,000 |
Equity Loss | $90,000 |
| Savings | $45,000 |
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Savings - Equity Loss = $45,000 Net Loss! |
Taking no other factors into consideration (such as work relocation, family emergency, etc.), the above charts can be summed up in the following way:
• Move up when the market is declining.
• Move down when the market is rising.
The above explanation is in no way intended to be a complete guide to buying and selling simultaneously.
For further information please feel free to contact me.
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