June 10th, 2008 3:45 PM by BILL WILBANKS
Want to "buy up", but don't think it's worth doing?
It's safe to say that just about anywhere in America today, property values have fallen in the last 2 to 3 years. Many folks also had huge increases in the 3 to 5 years that preceded the declines. Many would-be buyers have dug in for a long winter in real estate values, but there may be hope. Depending on your situation as to when you purchased your home and/or how much you put down on it when you bought it, this may be the "right" time to buy.
How can I possibly say that? Don't I watch the news every night? I'll explain and maybe I won't seem so crazy. I'm going to address this from a Florida perspective, since that's where I live and my business is located.
If you bought or sold a home in 2005 to 2006 you watched real estate values skyrocket upward by $40,000, $60,000, $80,000 and more in just 6 to 18 months driven by flippers, investors, and regular home buyers who wanted to get in while they could still afford to. Many of those folks, typically true move up home buyers at the time, were able to bring equity into the new home purchase through the sale of their old one. Most did very well on the sale of their home at the time because a rising tide rose all boats. Where is this going? Well let's say those folks paid $320,000 for the new home then. Let's also say that they brought $60,000 or more equity from the prior sale as down payment. Today, even with minor amortization on the new loan, let's say the balance is now around $260,000 for argument purposes.
Today due to what's happening in the current buyers market, you can buy much more home for the same money as you did then. And, rates are still historically low. "But," you say, "I'd lose money wouldn't I if I sold my current home today with values falling?" It depends, not necessarily, depending on when you bought into the loop then and how much equity you now have (what did you put down?), There are many cases where it may be worth your while to consider it even if you only break even on the sale of the current home. Why? Because you may be able to buy a bigger or more upscale home today for 2003 to 2004 prices. What had jumped to $350,000 or $400,000 or more at that time may be had today for $100,000+/- less in this market. Remember, the large price increase you may have realized in a very short time that provided your down payment to buy this home? If you break even or better on selling this home now, it could actually benefit you because you may end up basically trading up to a home that can be purchased at a much improved price today. The net effect could be more home or one in a more desirable location when you are done.
You know what gasoline prices are doing. Someone having to commute any distance may want to get closer to where they work to save gas, cut toll fees, and/or improve their quality of life by cutting back on their commute time and traffic hassle. Sometimes it's a matter of perspective. Half full...
All I suggest is that you may want to consider it or pass it along to someone it might also benefit.