Buying Up in a Down Market

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Why should you be purchasing a home now instead of waiting?
If you have the right knowledge you should know
* How to Dicuss the benefits of moving up in a down market
* Look closely at the cost savings of buying before the market rises
Why buy up in a down market?
* The difference in value between any two homes is smaller after the market falls
* Homes are more affordable now than they will be at the next market's peak
Most homes have had a minimum 10% drop in value
In this example the current home decreased in value by 10%, from $400,000 to $360,000.
They the next home should also be down 10%
According to the National Association of Realtors, the average value of the destination home is 50% more than the current home.
In this example, the destination home also decreased in value by 10%, from $600,000 to $540,000. The net difference is $200,000 at the peak of the market, but only $180,000 at the drop.
So if you look only at the 10% loss on your home, then you'll miss the hidden benefit of a down market. Instead of looking at your isolated sale, you must look at the entire transaction from your home to the next home. Had you sold at the peak of the market, you would've also purchased at the peak of the market.
For example, if you'd sold at $400,000 and made a move up the traditional 50%, then you Would have paid $600,000 for your next home; a $200,000 jump. When the tide of the market drops, all homes come with it. Although your home dropped in value by 10% to $360,000, the home you were going to purchase also dropped by 10% from $600,000 down to $540,000.
The move up is now only a $180,000 increase...a saving of $20,000.
For example, if you'd sold at $400,000 and made a move up the traditional 50%, then you would have paid $600,000 for your next home; a $200,000 jump.
Then the question is: "Do you want to buy before the bottom or after?" Purchasing after the bottom carries the benefit of immediate appreciation, but it also brings the risks of higher interest rates, fewer homes available and multiple offer competition. Understanding the desire is to purchase when the market bottoms. That way you'll get the lowest price and experience appreciation right away. But to do this, we'll have to know when the market has bottomed. How will we know this? The answer is, when the market goes back up. So we will never know when the market is at the bottom, only when it was at the bottom. So it is axiomatic that you will not knowingly purchase at the bottom. So then you will be buying as the market rises which will achieve one of your goals: experiencing immediate appreciation.
However you will be paying $xx,xxx more than the lowest price. So you must ask yourself; "Is there a benefit to paying that price before the market bottoms rather than after? You might be buying too early but you're not paying too much.
Here are the key benefits of buying before the bottom:
1. Lower interest rates. They will rise when the market starts rising.
2. More inventory. In a rising market your choices are fewer.
3. Relaxed pace. A rising market brings buyer competition and multiple offers.
4. Time in home. By buying now you can enjoy the home.
This is exactly right time to move up.

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