It is a fact that most people who are selling their home, are usually either upgrading or downsizing.
Those who are upgrading might be moving into a more prestigious suburb, perhaps closer to schools and regularly used amenities or preparing for a growing family. Those who are downsizing can include ‘empty-nesters’ who could feel the upkeep of their large family home is too expensive and time consuming to maintain.
I don’t think it would come as a surprise for most people to hear that the real estate market has cooled off slightly over the past six months. The knee jerk reaction when this happens is for sellers to delay selling and wait for the market to bounce back. This is not always the best thing to do.
It may come as a surprise that the current real estate market provides opportunities that are being overlooked by many due to the emotional pain associated with the decrease in value of their own home. For the past 2 years when home values were consistently appreciating, we all felt good about the market and homeowners wouldn’t think twice about selling their home for a gain and purchasing a larger more expensive home.
Here is a very simple example of what I mean:
A couple of years ago if a real estate agent told you your house would sell for $1,000,000, but you weren’t ready to sell at that stage (Perhaps you were waiting for the kids to move to high school). This year if your agent comes back, you may get the startling news that your much loved home is now valued at $900,000 in the current market.
You’re looking at a $100,000 shortfall in equity from two years ago. The initial thought process is usually ”How can we afford to upgrade now.”
But wait! When the tide goes out it takes all boats with it.
The dream house you like was also valued for more a couple of years ago, let’s say $1,300,000. It’s very likely its price may have corrected by the same percentage (10%), which means this year, it’s worth approx. $1,170,0000.
Here’s what this may mean for you looking to upscale:
As you can see, you are now $30,000 closer to buying your dream home in the current market then you were in the peak of the market.
There lays the silver lining.
Keep in mind that the markets aren’t as tidy as this simple graph, however the principle is powerful and a down market may be a good thing. Accept the reduction in value on your current home, because all you are doing is moving equity from one home to the next. It is all about the changeover figure.
Eventually the market will turn around, and what you really should be thinking about is where do you want to wait for the market to turn around, in your current home, or the home of your dreams?