SF Peninsula Real Estate Guru

If you currently own a home and are thinking of buying a new more expensive home, is this a good time to do so?

I think it very well may be.

All homeowners want to sell their home for as much as possible - that’s a given.

In the current market, one might not be able to sell their home for as much as they could have sold for in 2006. This is not true in all cirmcumstances. In many areas of the Peninsula, prices are as high as ever. But for the sake of argument let’s assume the current market value is slightly down from 2006.

Does it make sense to sell your current residence and buy a more expensive home at the present time?

One could say it makes sense to wait but let’s look at the numbers.

Let’s assume one’s current residence is worth $900,000 and the home one wants to buy is $1,200,000. Excluding closing costs, one would need to come up with $300,000 above and beyond the equity in the current home to purchase the new property. This $300,000 could be in the form of cash added above the equity out of the existing residence and/or an increase in loan balance.

Let’s assume property values increase 3% per year over the next 3 years - 2010.

The existing residence would be worth $983,454 and the new residence would be worth $1,311.272. The delta would have increased from $300,000 to $327,818.

So in this example waiting would have cost $27,818 plus the loss in enjoyment for 3 years of the more expensive home.

Taking advantage of the current market opportunity might well prove to be a smart decision.