Buying Up in a Down Market
- The difference in value between these two homes is smaller after the market falls
- A buyer is closer to affording the next home now then at the market’s peak.
Example: Current home down 30% from $400,000 to $280,000. The next home is also down 30%.
According to NAR the average value of a new destination home is 50% more than the current home. In this example, the destination home also decreased in value by 30% from $600,000 to $420,000.
Net Gain by moving up
The net difference is $200,000 at the peak of the market but only $140,000, at the drop. The buyer of the destination home is $60,000 closer to affording the home now then at the peak of the market.
If you look only at the 30% loss on your home, then you’ll miss the hidden benefit of this market. Instead of looking at your isolated sale, you must look at the entire transaction from your home to the next home. Had you sold at the peak of the market, you would’ve also purchased at the peak of the market.