The last few years were a rough time in the real estate market,
especially if you wanted to sell your home. Over the last year
things have been slowly getting better, with 2012 home prices in Salem increasing about 3.5% over 2011. However, no one
predicted the turnaround that happened during the late winter and
spring of this year.
Potential home buyers who have been waiting on the sidelines are
finally realizing that prices are rising, and mortgage interest
rates, although still at record lows, are bound to start rising. The
number of homes on the market have been steadily decreasing during
the last two years, to the point where it can be very difficult for
a buyer to find exactly what they are looking for in a home. There
have been numerous bidding wars on homes that were priced right and
in a good location.
What that means to the home owner who has been waiting to move
is that
now is the perfect time to sell your home. This spring we are seeing
homes selling for more than 10% over what they would have sold for
last year, and in half the time!
You may want to ask: "If prices are going up, why
don't I just wait until next year and then I can get more money for
my home, right?"
There are a couple of things to think about if you
want to "wait & see what happens". First, the market right now is
very unusual. Low inventory combined with high demand equals higher
prices. It's basic economics. But all it takes to change this
"perfect storm" we are currently experiencing is for a lot more
people to place their homes on the market. If the market gets
flooded with homes for sale it can even drive prices down again.
Also, there is the misconception that if you wait a year or two
until prices increase then you will have more money (home equity) to
put down on a new home. Let's look at this situation - the
difference between selling your home now and selling your home in a
year if prices have gone up 10%.
|
2013 |
2014 |
| Your
Home's Sale Price |
$300,000 |
$330,000 |
| Cost of
Your New Home |
$400,000 |
$440,000 |
|
Difference |
$100,000 |
$110,000 |
What you see in the above example is that your
new home will actually cost you $10,000 if you wait for prices to go
up. Yes, you will get more money for your home, but remember that
the home you buy next year is also going to be higher in price. If
you can buy your new home now and wait to sell your current home by
renting it out to cover all your costs (mortgage, taxes,
insurance, water, sewer, etc.) then it might make sense.
Otherwise, you are better off selling now while the market is hot.
Mortgage interest rates will almost certainly
rise by next year and add even more to your costs if you wait to
sell. You could actually end up paying hundreds of dollars more each
month for your new home next year than if you had purchased it this
year at the current record low interest rates. Let's take the above
example and see what our mortgage payment would be in each scenario
based upon interest rates going up just 1% over the next year.
| |
2013 |
2014 |
|
Cost of Your New Home |
$400,000 |
$440,000 |
|
20% Down Payment |
$80,000 |
$88,000 |
|
Mortgage Amount |
$320,000 |
$352,000 |
|
Interest Rate |
3.75% |
4.75% |
|
Monthly Mortgage Payment |
$1482 |
$1836 |
As you can see you could be paying over $350
more per month for the same home in 2014 over 2013. Of course, all
these examples are based upon speculation of what is going to be
happening with the real estate and financial markets. Though we deal
with both these markets on a daily basis, we do not claim to be able
to predict whether they will go up or down, but can only give our
best guess based upon all the stats available to us.
We would love to sit down with you and talk about whether it
makes sense for you to sell your home now, or maybe wait awhile. We have been
serving the North Shore community for a long time, and pride ourselves on the no
obligation, no pressure information we provide. Contact Jim Armstrong - 978-394-6736 or fill out this contact form
