Down Market can be a Good Time to Move Up

As prices of resale homes have been trending downward over the past 12-18 months across many markets in the United States, most homeowners have logically decided that now is not the time to sell unless absolutely necessary.  Now is not the time to trade up for that newer, better and pricier home. 

While that is sound logic, an angle that most homeowners may not have considered is that the newer, better and pricier home may never have been more affordable.  It might make the most sense to sell at a slight loss and buy at a discount. 

What we have seen in the Austin market and is most markets is that the First Time Homebuyer tax credit has spurred on sales in the lower end of the sales price spectrum.  This year, 14648 homes have sold in the Austin area.  Of those, 54 percent (7973), had sales prices under $200,000.   

This influx of buyers has not yet translated to what would be considered the "Move-Up" market segment ($300,000-$500,000).  This segment of the market has accounted for only 15% of sales year to date.  On the flip side, this price segment accounts for almost 22% of the active listings.  

With a limited buyer pool and supply of homes that currently exceeds market demand, home sellers in this position have endured longer time periods to sell, which leads to more price reductions and ultimately a better deal in the long run for a buyer.

In the grand scheme of things, taking a $5,000-$15,000 hit on the sale of a property to turn around and save $20,000-35,000 on the purchase of new home can be a sound financial decision for those who have the means to do so. 

On top of that, when you factor in artificially low interest rates on 15 and 30 year mortgages that can potentially save thousands of dollars in interest payments, now might be the best time to buy that newer, better and pricier home?