Waiting for just the right time to buy a house? You’re not alone. No one wants to buy at the top of the market only to have the value of their home drop as soon as they own it. But it’s not that simple. It seems obvious that price is the major factor in when to buy anything, but in real estate it’s only one of many things to consider. If you are selling a home you have to take that into consideration too. Because you need a place to live, don’t want to move twice, and count on the tax benefits of home ownership, you usually can’t time the sale of one house differently than the purchase of another. You have to look at the real estate market as a whole and decide if this is the best time to do everything. Here we are after the big crash. The real estate market is all but stagnant and interest rates and home prices are low. This is the perfect time to move up to a larger home.
it’s no secret that home prices are down and have been for quite a while. The big question on everyone’s mind is what’s going to happen next. Will prices fall further? When will they start to rise again? The fact is, if you’re selling and buying, it doesn’t really matter unless you would choose to sell your existing home and rent until the market hits bottom. The income tax ramifications of this are significant enough for most people that they would only consider this option if they believe that prices are going to drop significantly in a relatively short period of time.
Move up homes are priced very attractively right now. The difficult part is coming to terms with the current market value of your existing home. You know what you paid for it, what you invested in it, and what it was worth at the top of the market. What’s more, you’re proud of your home and emotionally attached to it. You need to step away from that to make a smart decision about selling it. The market value is set by the competition. Not the unrealistic listing price of a home near yours, but what a similar home actually sells for. You may get a little more for major improvements like remodeled kitchens and swimming pools, but not as much as you invested. And you won’t get any more for beautiful landscaping, upgraded garage doors or new carpeting.
This is a major roadblock for many homeowners. Many homes sit on the market with unrealistic listing prices because their owners can’t look at their homes objectively. If you know what your house is really worth to a buyer, you can sell it at that price and move on, even if you think the home is worth more.
Interest rates are at or near historic lows right now. This is likely to be the case until the real estate market starts picking up, and then rates will rise. Low interest rates are important, possibly more important than price, for two reasons. First, the interest rate has a huge impact on your monthly mortgage payment for the next 30 years. Don’t believe me? Find an online mortgage payment calculator and find out what your payments would be with a 4.5% interest rate vs a 6% interest rate. Each percentage point makes a huge difference in your purchasing power. buying a house is a long term decision. You’ll be making payments based on that rate for 30 years. When these rates are gone, they won’t be coming back soon. The second benefit of lower interest rates is that it increases the pool of potential buyers for your existing home. They have to qualify for the monthly mortgage payment, and more people will be able to do that at 4.5 or 5%.
In addition to home prices, the number of homes selling each month is well below normal. The fact that buyers are scarce is good for you when you negotiate to buy your new home. In this buyer’s market, sellers are offering incentives and reducing prices. You might be surprised to hear that this market will assist you in your efforts to sell your existing home. You won’t be able to get the price you’d like because appraisals won’t support an inflated value, but you will be able to sell quickly. Here’s why. The multiple listing service is full of listings of distressed homes. There are foreclosures that have been vacant for months and are in desperate need of maintenance and repair. There are short sales which require lender approval, which may or may not be forthcoming. Neither of these scenarios is the stuff that home buyers dreams are made of. If your home is attractive, in good repair and available to move in within 60 days, it will stand out from the crowd.
If you can look at the entire situation as a whole, you’ll see that this is the perfect time to move up to a larger home. You could miss out on a great opportunity if you wait for your existing home to be worth a certain amount or wait for the price on that new home to go down a little more. compare the whole situation now to what you expect the big picture to look like six months or a year down the road. If you’re one of the many homeowners looking for the right time to upgrade, this may be the perfect storm!
To avoid the problem of distressed sales, consider buying a home from a builder. Take a look at these San Diego new homes. You can get a great rate on a home loan, so don’t wait!
