Everybody is discouraged by the drop in home prices over the last 3-4 years, especially people who want to “move-up” to a larger home.
Our statistics show that the median selling prices of residential homes in our 24 town area (from Branford to Waterford) have dropped 14.1% since 2006 (as of November 2009).
So should you “move-up” now or wait for prices to re-bound to 2006 prices (the same percentage as the decline 14.1%)?
I’ve estimated the results of buying now or waiting as shown in the table below:
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MOVE UP NOW ?
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Current Home
|
Move-UP Home
|
|
2006 Price
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$ 300,000
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$ 400,000
|
|
2009 Price (-14.1%)
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$ 257,700
|
$ 343,600
|
|
Purchaser Savings
|
$ 42,300
|
$ 56,400
|
|
Net Gain for Buyer
|
|
$ 14,100
|
|
Tax Credit
|
|
$ 6,500
|
|
Total Net Gain
|
|
$ 20,600
|
|
|
|
|
|
|
|
|
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WAIT FOR HIGHER PRICES ?
|
Current Home
|
Move-UP
|
|
2006 Price
|
$ 300,000
|
$ 400,000
|
|
2009 Price (-14.1%)
|
$ 257,700
|
$ 343,600
|
|
Future Price (14.1% Gain)
|
$ 294,036
|
$ 392,048
|
|
Move Up Buyer Gains
|
$ 36,336
|
|
|
Move up Buyer Pays
|
|
$ 48,448
|
|
Net Cost for Move up Buyer
|
|
$ 12,112
|
We’re making several assumptions including:
1. Current home and move-up home prices ($300,000 and $400,000)
2. That the tax credit will only last until April of 2010.
3. Prices will increase 14.1% in late 2010 or 2011 (at the same percent decline since 2006)
Why is the gain so much larger by moving-up now? Any increase in home prices will be a larger dollar amount using the median price percent change AND we’re assuming the government tax credit will be phased out at the end of April 2010.
So now is really a good time to “move-up” to that home you’ve always wanted!
In addition, you “save” a net $14,100 by purchasing a more expensive home compared to what it would have cost in 2006 PLUS the government tax credit.