Up? Down? What’s Going on in the Real Estate Market?

Right now we are in a transitional period between recession and recovery. The pendulum of favor is swinging away from the buyer and toward the seller. What does that mean for you?

Downsizers: In an ‘up’ market like the one we are approaching, prices rise consistently at most price points. You will do best if you can wait until we are firmly into the recovery (maybe one more year?). Example: If the property you are looking to buy is $275k and prices improve by, say, 8% through next year, by the end of next year you may find yourself paying close to $300k for it. But the same math applies to the property you are selling. If it is worth $450k now, you’re likely to get $36k more for your house by waiting. That’s a net gain of $14,000 just by being patient with the market recovery. One caveat: If interest rates start to climb, it could neutralize that difference quickly and dictate swifter action.

Upsizers: ‘Upsize in a Down market.’ Your sweet spot is shrinking, upsizers. The value of your current property is improving, which is terrific, but so are the values on your proportionately larger and more expensive property. Selling the $275k house and buying the $450k house now presents a difference of $175k. With 8% growth that difference stretches to $189k. Save yourself some money and make your move now.

Second-Home Buyers: I have always maintained the position that vacation homes are bad financial investments. I make some exceptions for income properties that can carry at least most of their weight with rentals. Except for the odd circumstance where you purchased at an irrationally low number and are looking to sell in a robust market, look for the return on this investment only in your hammock. For a vacation home purchase, no matter what the market, try to buy as modest as you can and be realistic about the trouble and expense of upkeep, insurance, etc. You want to come there to relax and recharge, not scrub three bathrooms and fret about bills.

This is a guest blog post from Katie Clancy, a Cape Cod native and real estate agent with William Raveis Real Estate in their new Yarmouth Port, MA office. Katie can be reached via email at katie@katieclancy.com or by phone at (508)737-1248.

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