Is this the Right Time to Sell my Home?

by Cristina Callegari Kanellopoulos

How can you be sure that selling your home today will make financial sense and benefit your family in the long term? While there is no easy answers or guarantees regarding the housing market, understanding the economic forces behind the market trends will give you some peace of mind for the present, as well as some hope for the future.

When discussing the housing market, many real estate experts talk about the current Inventory. In general business terms, inventory is the supply of products that a business has in stock. In real estate terms, it refers to the number of homes on the market. The more homes on the market, the lower their prices will be. It is a simple case of Economics 101 "Supply and Demand."

If the market has dropped to the point that your home is worth less than what you paid for it, you've likely lost most of your down payment. If you have to sell your home for less than what you paid for it, your situation is referred to as Upside Down. Put simply, you owe more on the house than what it is worth. If you find yourself in that situation please read my article on Short Sales. If that is not the case - please read on.

Let's say you bought a home for $500,000 and paid a 10% down payment on it ($50,000). And, let's say the home values in your area have gone down by 10%. This means your home is worth $450,000. You have lost your entire down payment.

However, there is a bright side to this situation. When selling a home in a soft market, it is true that you will have to sell at a lower price than you had hoped for - but (and this is key) if you purchase another home shortly thereafter, you will be able to purchase your new home at a reduced price as well. So, in the end, it all balances itself out, and actually makes a Buyer's Market an ideal time for a Seller to upgrade their existing home.

Let's look at some plain numbers. Let's assume that the prices in your neighborhood in Nassau County have dropped by 10%, and you'd like to continue living in the same neighborhood. Your $500,000 home went down $50,000. While that $650,000 home that you'd like to upgrade to actually went down $65,000. You are actually walking away from this situation $15,000 ahead!

I know you are scratching your head right about now. But let's talk this through the other way around. Let's say you purchased your home for $500,000, and after living there for 5 years you've outgrown it. During those 5 years let's assume that your property value went up by 15%. (Average rate of increase year-over- year during a stable real estate market is 3% annual growth; 3%x5 years = 15%). Which means your home is now worth $575,000. That's wonderful you say, Right? That depends, if you are downgrading, yes it is - but, what if you want to upgrade? The important detail that Sellers and Buyers alike tend to forget is that if your house went up in value - so did everyone elses. That $650,000 home that was out of your price range 5 years ago is now worth $747,500. While you gained $75,000 in the value on your home, you actually LOST $22,500 on purchasing the upgrade.

And, that's just one piece of the puzzle. Five years ago interest rates were significantly higher than they are now. That means that paying off your existing mortgage, and purchasing a new home with a lower fixed interest rate will also save you thousands of dollars over the course of the loan.

If you need help deciding whether or not to sell your home call me, Cristina Callegari Kanellopoulos at 917-921-5397 today. I'll help you navigate the pros and cons so you can make an informed decision.