In our local area, prices have been depressed for a while. California and Florida are the top two states for foreclosures and short sales, REO's etc. This had caused a pretty negative effect on our markets. But actually in the early 2000's boom years, most of our areas were up about 35% in value appreciation. So, it's all relative isn't it? If we are now down about 15% to 20%, we are still ahead. And, if you subscribe to the real estate concept of buying and holding until the time is right to sell, well you might want to think about the following too.
Is there a reason to sell in a down market rather than wait for that 15% to 20% in price appreciation to regain in your area? You might think I am crazy, but just look at this analysis... (I am using round numbers for ease of illustration.)
Say your home was worth $300,000 three years ago.
Maybe you lost 20% in value in the last year and a half.
That's $60,000, so your home is now worth $240,000.
Say the home you wanted to purchase was $500,000 three years ago.
Maybe they lost 20% in value in the last year and a half.
That's $100,000, so their home is now worth $400,000.
The GAP between your home and the new home is closer than it would have been two to three years ago.
Sell 3 years ago $300,000
Buy 3 years ago $500,000
Difference $200,000
Sell now $240,000
Buy now $400,000
Difference $160,000
What does this mean to you? It means $40,000 less in down payment or mortgage. If it is $40,000 less in mortgage at 6% interest, that's $240 per month less in monthly mortgage payment you are paying for 30 years!!! Compound that for a nice savings.
Then in California our property taxes are approximately 1.25% of the sales price.
3 years ago - $521 per month in property taxes
Buy now - $417 per month in property taxes
Savings $104 per month
Add on the fact that our interest rates are almost at the lowest of low that it has ever been and you will save more on your monthly payment than almost any time in history. The bonus for most areas will be that the conforming loan rates are about to rise, when President Bush signs the bill. This is huge for us in California where it could rise from $417,000 to $729,000!!! This would make a huge difference for people wanting to refinance or purchase. If you don't own real estate, now may just be the time to look at buying with prices at a low point. And, it may be time to look at selling and moving up?
What do you think?
For more on this topic, visit my blog http://activerain.com/blogsview/278172/This-IS-Last-Year
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