Buying Up In A Down Market -- A Great Idea For Buyers
Here's some good advice for buyers: when the market for real estate is falling, it's a great time to buy a more expensive property. It's called "buying up in a down market", and its something sophisticated real estate buyers do during cycles like this when real estate prices are falling.
Here's how this works and why its a good idea.
When most people buy a new home, they generally pay 50-percent more for it than the amount they sold their old home. Let's say your current home is valued at $300,000. Most likely you'll buy-up to a home costing around $450,000.
Let's also assume that real estate prices are falling. Right now, the St. Petersburg Times says median prices have fallen 9.5-percent for the year ended September 30, 2007. To make the math easy in this example, let's round up to a 10-percent annual drop in median prices.
If you sold your home for it's peak value, it would sell for $300,000; and the house you want to buy at its peak is $450,000. So the difference is $150,000, and you'd have to come up with that additional amount of money.
But since real estate prices are falling, you delay your purchase. While you wait, the value of your property falls by the aforementioned 10-percent to $270,000.
This means that the new house you want is now well past the 50-percent value increase that is the average in move-up situations. You may think that the house is now beyond your means and totally out of reach.
Not so fast!
The value of that new home dropped right along with your home's value. That's generally the way market fluctuations work -- everybody suffers equally. So now, that new house is valued at only $405,000. If you do the math, you'll see that the difference between the new house and your hold house is now only $135,000. So instead of having to come up with an addtional $150,000 you need only find an additional $135,000. Thus you saved $15,000 thanks to the falling price market.
So if you've been waiting for prices to get lower, well, I'd stop waiting and start buying right now. Sell your house for what you can get in the current market and buy that new house at today's lower prices. You'll probably end up paying less for the new house and pocket some savings.
But don't wait too much longer. I keep hearing buyers say they are waiting for the market to "bottom out". That's probably not a good strategy. It may be impossible to accuratly determine when the market will bottom out, and once it starts moving up again the good deals will be gobbled-up and you'll be left looking at higher prices and decreased inventory. You know the old saying: He who hesitates is lost.
You need to do what savvy buyers have done for years: Buy Up In A Down Market.
For more information on real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.
Here's how this works and why its a good idea.
When most people buy a new home, they generally pay 50-percent more for it than the amount they sold their old home. Let's say your current home is valued at $300,000. Most likely you'll buy-up to a home costing around $450,000.
Let's also assume that real estate prices are falling. Right now, the St. Petersburg Times says median prices have fallen 9.5-percent for the year ended September 30, 2007. To make the math easy in this example, let's round up to a 10-percent annual drop in median prices.
If you sold your home for it's peak value, it would sell for $300,000; and the house you want to buy at its peak is $450,000. So the difference is $150,000, and you'd have to come up with that additional amount of money.
But since real estate prices are falling, you delay your purchase. While you wait, the value of your property falls by the aforementioned 10-percent to $270,000.
This means that the new house you want is now well past the 50-percent value increase that is the average in move-up situations. You may think that the house is now beyond your means and totally out of reach.
Not so fast!
The value of that new home dropped right along with your home's value. That's generally the way market fluctuations work -- everybody suffers equally. So now, that new house is valued at only $405,000. If you do the math, you'll see that the difference between the new house and your hold house is now only $135,000. So instead of having to come up with an addtional $150,000 you need only find an additional $135,000. Thus you saved $15,000 thanks to the falling price market.
So if you've been waiting for prices to get lower, well, I'd stop waiting and start buying right now. Sell your house for what you can get in the current market and buy that new house at today's lower prices. You'll probably end up paying less for the new house and pocket some savings.
But don't wait too much longer. I keep hearing buyers say they are waiting for the market to "bottom out". That's probably not a good strategy. It may be impossible to accuratly determine when the market will bottom out, and once it starts moving up again the good deals will be gobbled-up and you'll be left looking at higher prices and decreased inventory. You know the old saying: He who hesitates is lost.
You need to do what savvy buyers have done for years: Buy Up In A Down Market.
For more information on real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.
-30-
posted by Terry Ward at 5:41 AM
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