Even in our relatively insulated Cape Cod market we have seen increased foreclosures and declining values. This plus the negative national media has homeowners spooked. They are putting off selling their homes, using the same reasoning they use for the stock market: 'buy low, sell high'.
This is an excellent strategy. Sell when prices are at their peak, then when the market inevitably cools off, move in for the kill. But there is a problem in that reasoning. After you have sold your home for a tidy sum and before you find the real estate bargain of the century, where do you live? Unless you are going to travel the world for a few years or move in with Mom and Dad, you're going to be buying and selling in the same market. So when is it really the right time to sell? Let's do the math.
Suppose you currently live in a home that, in an average market, is valued at $300,000. The house you want is valued at $500,000. In a hot market, with prices up 10%, your home will go for $330,000, but you'll have to pay $550,000 for the one you want. In a cool market, like the one we are currently in, your house will sell for $270,000, but your dream home is only $450,000. In today's market you will save $40,000!
For people who are downgrading to a lesser valued home or condo, it makes sense to hold out until prices come up. But for the vast majority of people, now is the time to make your next real estate move!