Should move up buyers make a move in this market?

Recently, past clients have asked me if this is a good market to sell their homes and move into better homes in better neighborhoods. This is an uncommon thought as compared to the typical national market sentiment that sellers should stay put in the current market turmoil. In working with these clients I have found that this market is a great opportunity for some move up buyers. The general discussion goes like this…

You will be taking less profit on the sale of your home, but you also will be buying for less on the other end. Usually, I am finding that this opportunity is open to clients whose income has risen since they bought their homes, thus they can afford to buy into nicer neighborhoods. Anti-intuitive to the current market mentality, I have found that it may make better sense to make the move now, then it did in the hot market.

2 years ago move up buyers were selling their homes and getting more money then they ever thought possible. Yet, they would also be competing against many others and buying homes at higher prices. This market fed itself with sellers cheering the competition when selling and dreading it when buying. It also usually meant increased capital gains taxes on the sale and increased property taxes on the purchase.

Now, as the market has changed, home owners have been watching as median home prices have fallen off of their record highs. Yet, buying at a cheaper price means that you save on annual reoccurring taxes. As a buyer you now have the ability to negotiate with sellers who are lacking multiple bidders. We are also still seeing historically low interest rates that are still making loans very attractive to buying. Not to mention the Federal Government that is creating incentives for buyers, by lowering prime interest rates and raising conforming rates nation wide.

Here is a recent example. I recently completed 2 transactions for a client who sold their 1.5 million dollar plus home and traded for a more expensive home. On the sale I estimate that they took about $200,000 less then the top of the market price. Yet, on the purchase they bought a home which cost less then the current cost to construct the home (the price per square foot was less then current cost to construct the home). I estimate the savings to be approximately $200,000 on the purchase. They bought into a situation where their new home has a better potential for future appreciation. They bought a home that is 1,000 square feet larger than their previous home, in a better neighborhood for them. Their taxes ended up being approximately $3,000 less per year then if they had purchased at the height of the market. They got a great interest rate on the portion of the home they leveraged. They got less profit on their sale, but gained even more on their purchase.

Just as in the hot market, the trick to moving up now is a financial and real estate team devoted to developing an uncommon strategy to better your situation. I have found that this market is a great opportunity for many move up clients.

Thanks Kerrythis for the car image above.