Today’s housing market presents considerable opportunities for potential home buyers considering a “trade up” move. Prices are stabilizing in our area and some recently purchased homes are actually increasing in value, albeit modest. We are getting back to a sustainable real estate market. This combined with near historic low interest rates and high inventory levels create a great market for shopping.
Even amid such incentives, many trade-up home buyers remain on the fence about making the lifestyle change they desire due to the concern over selling their current property. Consumers today are benefiting from the price corrections many markets have seen over the last few years. So while they may have seen the value of their current home decline, they are also finding that the “trade up” home has also seen a price reduction. For example, the difference in a 20 percent price decline for a $300,000 to $400,000 home is $20,000. And, when the market improves and price appreciation returns, the more expensive home will see a higher dollar increase.
While potential home buyers are likely aware of the positive impact of low interest rates, high inventory, tax benefits, and affordability of purchasing today, many are confused and concerned if now is indeed the right time for them to buy. Here are a few questions to help “trade-up buyers” decide if now is the right time to make a move:
1. Have you built substantial equity in your current home? Home equity can be defined as the value of a home, minus the amount of outstanding debt. Although equity does not generally develop in the first few years of home ownership, five or more years of home payments may create significant unrealized gains.
2. Has your income or financial situation improved? Homeowners should consider their overall financial situation including current and future expenses in order to make an educated decision on price range for a new home. For example, an increase in salary may allow for an increased mortgage.
3. Has your lifestyle changed? Lifestyle changes are one of the most common reasons people choose to move. Starting or adding to a family may require an extra bedroom or additional square footage, as well as a desire to live closer to work or family may provide the impetus for a move to a larger home.
4. Is your current residence one that could potentially be rented out? For those homeowners who are ready to make a move but are concerned about purchasing a new home before the current property is sold, renting out the current residence may be a viable option.
5. Are interest rates attractive? A low interest rate means lower mortgage payments on homes of the same price. Interest rates are at historical lows. Visit with your preferred lender and determine what type and amount of loan you qualify for.
Then do some shopping! There are many homes for you to see and compare to your current living situation. It could be time to “trade up!”
