Moving Up in a Down Market

I recently worked with a couple that was just married and now had a much bigger family than before: they now had five kids! They made a great family, but they had quickly out-grown their current home. They were wondering if this was a good time to move up to a larger home to accommodate their larger family.

The problem was they had a home to sell and knew from all the news that home values had dropped. They weren’t going to be able to stay in their present house so the couple was conflicted with what to do. Was this a good time to do this?

It’s important to remember in a down market that you aren’t the only one losing value on your home: everyone is. This makes for some opportunities when you have to sell your home and move up to a more expensive one.

If your current house drops 20% in value (for example: it was originally $200,000 and now is worth $160,000) this does constitute a $40,000 loss. But, let’s say the more expensive house you want to buy has also lost 20% in value (originally $300,000 and now is $240,000 which is a $60,000 loss). You are actually ahead of the curve with $20,000 dollars in value (the losses subtracted: $60,000-$40,000).

This seemed like a great strategy to them so we were able to start looking. We eventually found the larger home for less money. We sold her home for less, but were still ahead of the curve for when the market recovers.

Moving up in a down market most always makes sense because the percentages work in your favor. While it’s easy to focus on the loss of value in the present, gains can be made when you move up to a new home. The only other criterion is to be able stay in that home for a minimum of 5 years.; you never make out selling a home in less time than that.

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