Real estate is always a game of knowing when to make your move.
With that in mind, industry experts suggest move-up buyers remain mindful of how quickly home prices appreciate while riding the current market recovery.
For move-up buyers wanting to wait out rising home prices to ensure they can sell their current home at a maximum price, analysts say the value of such a move depends on when the homeowner purchased their current residence.
Daren Blomquist, vice president of RealtyTrac, says homeowners who purchased during the down market of the last two or three years would be wise to move up in 2013.
“Because they bought near the bottom, these homeowners should have built up some good equity that can go toward the purchase of a new home, and waiting longer to build more equity likely won’t provide much advantage given that other homes that they might want to move up to will also be appreciating at roughly the same pace,” said Blomquist.
He added, “In addition, the low interest rates of 2013 are certainly not guaranteed to last forever.”
According to data from the Mortgage Bankers Association, mortgage rates are expected to reach 4.4% in the next 12 months and the 20-year average could possibly hit as high as 6.5%.
Real estate broker Redfin says this is precisely the reason why some homeowners wanting to sell their current home in lieu of finding a nicer one should not wait.
While waiting a few years will most likely mean the selling price of the current home will be higher, it also means the price of the new home will rise as well.
“If you’re selling one house just to move up to another, it does you no good to wait for prices to rise — the price of the move-up home will increase faster than the price of the place you’re leaving behind,” said Redfin CEO Glenn Kelman.
With that being said, Blomquist warns potential homebuyers against rushing to buy a home once they have sold their current home.
According to RealtyTrac data, more foreclosure inventory will become available in the next six to 12 months in markets with rebounding foreclosure activity in 2012. Markets such as Florida, Illinois, Ohio, Pennsylvania, New York and New Jersy will see the strongest growth in foreclosure inventory, according to RealtyTrac.
“Particularly in these markets it might be good for the move-up buyers to sell in the spring when inventories are still tight, rent or stay with family for a few months, and then buy in the fall when that additional foreclosure inventory is listed for sale,” said Blomquist.
However, for homeowners who purchased near the peak of the housing market — in the past five to seven years — it’s probably better to wait for home prices to rise further before they sell and move up, Blomquist advises.
“If these folks need to move because of a job or other reason, it is worth considering renting out the property in the short term to take advantage of the strong rental market,” said Blomquist.
